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Frequent Contributor
Posts: 326
Registered: ‎04-04-2012
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Should I pay off my car loan early?

We have 2 years left on our car payment.  We are considering doubling them up for the next year so that loan will be done with prior to buying a house.  Would that hurt our score after it was paid off?

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Posts: 14,051
Registered: ‎04-15-2011
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Re: Should I pay off my car loan early?

My opinion, hmmm.  Would decrease your DTI and you would be paying out less in interest.  The account will stay on as a positive TL for 10 more years.  I would say go for it if you can still save money for your down payment.

Starting Score: 504
July 2013 score:
EQ FICO 819, TU08 778, EX "806 lender pull 07/26/2013
Goal Score: All Scores 760+, Newest goal 800+
Take the myFICO Fitness Challenge

Current scores after adding $81K in CLs and 2 new cars since July 2013
EQ:809 TU 777 EX 790 Now it's just garden time!
Valued Contributor
Posts: 1,587
Registered: ‎08-30-2012
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Re: Should I pay off my car loan early?

It's considered an installment loan. It has a lot less effect on your credit than revolving accounts. Pay it off like Shogun said and save yourself some money. I paid my wifes care of 13 months early last year and it had little effect on her score.

 

 

Scores: about 700 across the board
Total CL: $275k
Frequent Contributor
Posts: 329
Registered: ‎08-24-2012
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Re: Should I pay off my car loan early?

I say pay it off too. if I don't buy a new car before the end of the year, I plan to pay mine off with my tax return, or most of it at least Smiley Happy


Goal Score: 700
Frequent Contributor
Posts: 326
Registered: ‎04-04-2012
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Re: Should I pay off my car loan early?

Yes, we can pay it off early and still save.  We put a set amount in savings each month and it never gets touched.  Whatever is left in checking at the end of the month also gets put into savings.  There has always been enough extra in the checking at the end of each month to double or even triple the car payment.

New Contributor
Posts: 52
Registered: ‎09-20-2012
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Re: Should I pay off my car loan early?

As a mortgage loan officer, I say having installment loan debt is good. You'd be better directing any cash resources toward revolving debt if you have. If you have DTI issues, then pay it down so there is just under 10 months of payments. You don't have to count the monthly payment towards the DTI if less than 10 months is owed.

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Posts: 326
Registered: ‎04-04-2012
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Re: Should I pay off my car loan early?


timotiger wrote:

As a mortgage loan officer, I say having installment loan debt is good. You'd be better directing any cash resources toward revolving debt if you have. If you have DTI issues, then pay it down so there is just under 10 months of payments. You don't have to count the monthly payment towards the DTI if less than 10 months is owed.


We do have another car loan, but haven't even started making payments on it, yet.  We don't have any other debt, just the two car loans.

 

Moderator
Posts: 14,051
Registered: ‎04-15-2011
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Re: Should I pay off my car loan early?

Then definitely pay that thing off.  Gone, history, out of here!

Starting Score: 504
July 2013 score:
EQ FICO 819, TU08 778, EX "806 lender pull 07/26/2013
Goal Score: All Scores 760+, Newest goal 800+
Take the myFICO Fitness Challenge

Current scores after adding $81K in CLs and 2 new cars since July 2013
EQ:809 TU 777 EX 790 Now it's just garden time!
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Posts: 382
Registered: ‎06-26-2012
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Re: Should I pay off my car loan early?


fuzzybean wrote:


We do have another car loan, but haven't even started making payments on it, yet.  We don't have any other debt, just the two car loans.

 


I'd suggest putting any extra amount you were planning on paying on the origional car loan go towards the one you just opened....

 

Let's say your payment is $300/month if your paying $600/month for 1 year yeah you'll pay it off a year quicker, but honestly your not going to save that much in interest at that point unless you have a HORRID interest rate.

 

I would put that extra payment towards the loan you JUST took out and work on getting that down. It won't be paid off by the time you go for a mortgage, the other one might be within 10 months so won't really hurt you at all. and in the end if you pay an extra 300 (or whatever your plan was) on the new loan, you'll be bringing the principle down quicker, thus meaning you'll be charged less interest so even if you only do it for a year - you'll end up saving much more in interst than you would have if you paid off the other one in 1 year.

 

Do the math and save yourself some cash in the long run.

 



Current: Eq- 624 Ex - 631 (lender pulled) TU - 661 (lender pulled)
Goal 700+ across all three
Frequent Contributor
Posts: 326
Registered: ‎04-04-2012
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Re: Should I pay off my car loan early?


scarrollprint wrote:

fuzzybean wrote:


We do have another car loan, but haven't even started making payments on it, yet.  We don't have any other debt, just the two car loans.

 


I'd suggest putting any extra amount you were planning on paying on the origional car loan go towards the one you just opened....

 

Let's say your payment is $300/month if your paying $600/month for 1 year yeah you'll pay it off a year quicker, but honestly your not going to save that much in interest at that point unless you have a HORRID interest rate.

 

I would put that extra payment towards the loan you JUST took out and work on getting that down. It won't be paid off by the time you go for a mortgage, the other one might be within 10 months so won't really hurt you at all. and in the end if you pay an extra 300 (or whatever your plan was) on the new loan, you'll be bringing the principle down quicker, thus meaning you'll be charged less interest so even if you only do it for a year - you'll end up saving much more in interst than you would have if you paid off the other one in 1 year.

 

Do the math and save yourself some cash in the long run.

 


The new loan is 0% interest for 60 months.  The old is 9%.  I guess since we have the new loan, getting rid of the older one is best.

 

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