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Established Contributor
FICO_Focused
Posts: 905
Registered: ‎05-09-2007
0

Rapid Repayment of Installments...

Does anyone know the benefits of rapidly paying down installment accounts? We all pay our CCs more than the minimum, keep utilization low and reap the benefits there, and they are significant.
 
But what is the preferred / optimal scenario for Installment loans Auto loans specifically?
 
I have ~$30k owed on a 60 month plan w/ 57 months remaining... Is there any FICO benefit from paying down the beginning balance at an expedited rate? Or is it just the timely payments that are taken into consideration here?
 
Take Care.

Rob
Senior Contributor
ilovepizza
Posts: 3,071
Registered: ‎05-17-2007
0

Re: Rapid Repayment of Installments...

I completely recommend paying it off early if you can because:
1. Less interest to pay!
2. Looks better to lenders for income reasons.
3. You still get points for the loan being paid.
4. The debt is counting against you on your score.

If you choose to not pay off early.
1. More history.
2. Lenders see you as more profitable.

IMO pay off as fast as you can unless you have 0% int.
There are other ways of making history that will cost you less $$.
If we never set higher goals we would never get as far.
sol, credit 101, acr, abbreviations, calc
Established Contributor
rifleman
Posts: 565
Registered: ‎06-11-2007
0

Re: Rapid Repayment of Installments...

i wondered this too...i have three student loans left for about $24,000 total debt--it's my only real debt as I have no mortgage or any credit card debt. I have thought of paying it off as fast as I could, but now I tihnk I'm going to pay at a medium pace and save more, incase something happens, and if anything, I can always use a chunk of savings at some point to pay down more of the loan rapidly if necessary
Moderator Emeritus
fused
Posts: 16,373
Registered: ‎03-12-2007
0

Re: Rapid Repayment of Installments...



FICO_Focused wrote:
Does anyone know the benefits of rapidly paying down installment accounts? We all pay our CCs more than the minimum, keep utilization low and reap the benefits there, and they are significant.
 
But what is the preferred / optimal scenario for Installment loans Auto loans specifically?
 
I have ~$30k owed on a 60 month plan w/ 57 months remaining... Is there any FICO benefit from paying down the beginning balance at an expedited rate? Or is it just the timely payments that are taken into consideration here?
 
Take Care.

Rob


Your FICO scores will rise a little (maybe none at all) by paying the auto loan off quickly.  You stand to gain more by paying on time for the whole term of the loan. 
Credit Profile -
FICO 08 Scores (11-08-2014): EQ 818, EX 817, TU 822
All three scores were 850. Lost points for not having an open installment TL. So, BE WARNED!!!!!
Credit History: 26+ years ~ AAoA: 12 years ~ Util: 1% ~ Inqs: EX 1

Senior Contributor
smallfry
Posts: 4,831
Registered: ‎04-20-2007
0

Re: Rapid Repayment of Installments...

You might want to try to pay the car loan down to 50% of the original loan amount. After that you won't save as much money as you think because car loans are front loaded with interest. FICO likes to see this balance lowered as quickly as possible. I think they like to see an installment on your records but don't give you much credit point wise for it. Go to Bankrate and play with the numbers to see how much you can save.
Moderator Emeritus
fused
Posts: 16,373
Registered: ‎03-12-2007
0

Re: Rapid Repayment of Installments...



ilovepizza wrote:
I completely recommend paying it off early if you can because:
1. Less interest to pay!
2. Looks better to lenders for income reasons.
3. You still get points for the loan being paid.
4. The debt is counting against you on your score.

If you choose to not pay off early.
1. More history.
2. Lenders see you as more profitable.

IMO pay off as fast as you can unless you have 0% int.
There are other ways of making history that will cost you less $$.

1. Yes
2. probably not
3. hardly
4. NO!
 
1. Yes, if payment are on time
2. Ask Tuscani:smileywink:
Credit Profile -
FICO 08 Scores (11-08-2014): EQ 818, EX 817, TU 822
All three scores were 850. Lost points for not having an open installment TL. So, BE WARNED!!!!!
Credit History: 26+ years ~ AAoA: 12 years ~ Util: 1% ~ Inqs: EX 1

Valued Contributor
Boswd
Posts: 1,065
Registered: ‎04-26-2007
0

Re: Rapid Repayment of Installments...

or you just go by the fact that if you are in a position to pay the car loan off early, not only will you save money on the interest ,you will have one less debt to worry about and you can use that money you have been paying to either help pay off other debt,  increase your savings or invest.   It's not going to tank your score so I would think by paying it off early the benefits to you and your personal finances FAR outweigh any if any slight and temporary decrease you might get in your score.
Established Contributor
rifleman
Posts: 565
Registered: ‎06-11-2007
0

Re: Rapid Repayment of Installments...

With me it's a question of cash flow--I can afford to send most of my income to student loans right now and still live a relatively comfortable life, but I'm not sure I'm doing the right thing. I wonder if it's better for me to save money for a downpayment on a house rather then pay down relatively low-interest student debt faster I am constantly confused by this
Established Contributor
FICO_Focused
Posts: 905
Registered: ‎05-09-2007
0

Re: Rapid Repayment of Installments...

The reason I ask is that I was recently turned down for a couple of CCs... One of the common reasons was that the amount owed on Installment account is to high.
 
The only installment account that I have is an auto loan... I'm in an equity position and I'm frustrated that it would be a reason cited not to offer credit to me. So I thought I'd focus a little bit of time and energy doubling up on some payments for the next few months.
 
I wish we could fix our credit as quick as we can screw it up...
 
BTW - Interest rate is 5.95% I'm not carrying any other debt. So if I understand the majority of the responses, I won't be likely to see any FICO benefit from paying down early, but I'll still get the history regardless... So I guess I'll double up the payments for the next 6 months and see what happens.
 
Thanks for the input.
 
Rob
Moderator Emeritus
masdeocho
Posts: 2,050
Registered: ‎04-17-2007
0

Re: Rapid Repayment of Installments...

Don't get confused -- there is no single "right" answer.  Some people are debt-adverse, and want to pay off as much debt as fast as possible.  Others believe in having an emergency fund despite having debt.  Still others believe in saving for a goal above all else  And some like to do a combination of paying down debt/saving.  The best approach for you is ... well, the best approach for you. 
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