Situational choice: Pay off student loans all at once?

[Anonymous]

I have a student loan balance of around $33k with a 2.3% interest rate on them.  They're my only installment account, slightly over 12 years old,  and I just this week applied for and was approved for a Cap1 quicksilver1 which will be my first revolving account since I was young and irresponsible.    I have a clean (but short, due to loan rehabilitation) payment history, no derog items, and 1-2 inqs per CRA. 

I find myself in a situation where I can totally pay off the loans towards the end of this year, but with my limited number of accounts, am I better off perhaps paying $30,000, and then doing normal payments while I get a few more accounts open elsewhere?   I'd like to have the student loan monkey off my back, but I want to make sure that I'm not making things hard for myself by doing so.   I intend to apply for a mortgage in the next 18 months. 

Oddly, these loans don't report to Experian anymore (but they used to! The account shows as closed after they were sold to another lender… even though it was the same lender. Don't ask, I can't figure it out either), where I have a ~80 point higher FICO (not FAKO) score – presumably as a result of that.  This leads me to believe that perhaps I should just pay them off, but I figured I'd ask the experts, and the people who pose as experts too  

Thoughts? 

[Luscher]

IMO I would pay them off.

[Anonymous]

How do you get such low rates?

Thanks Tara

[Anonymous]

Honestly, no idea how the rate is so low.  

[Anonymous]

"IMO I would pay them off."

Is there no real benefit to holding on to 'em for a little longer to have more of a payment history? 

[Pat94108]

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@Anonymous wrote:

"IMO I would pay them off."

Is there no real benefit to holding on to 'em for a little longer to have more of a payment history? 

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Honestly, based on my personal experience installment loans don't seem to have much of an impact. Revolving credit is a different story. A co-worker of mine does keep a student loan going (amount less than 2k) for the same reason. I'd pay it off as well, but if you want to keep it open with a small balance like my co-worker, I don't think it'll hurt. Someone else can chime in. 

[MarineVietVet]

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@Anonymous wrote:

I have a student loan balance of around $33k with a 2.3% interest rate on them.  They're my only installment account, slightly over 12 years old,  and I just this week applied for and was approved for a Cap1 quicksilver1 which will be my first revolving account since I was young and irresponsible.    I have a clean (but short, due to loan rehabilitation) payment history, no derog items, and 1-2 inqs per CRA. 

I find myself in a situation where I can totally pay off the loans towards the end of this year, but with my limited number of accounts, am I better off perhaps paying $30,000, and then doing normal payments while I get a few more accounts open elsewhere?   I'd like to have the student loan monkey off my back, but I want to make sure that I'm not making things hard for myself by doing so.   I intend to apply for a mortgage in the next 18 months. 

Oddly, these loans don't report to Experian anymore (but they used to! The account shows as closed after they were sold to another lender… even though it was the same lender. Don't ask, I can't figure it out either), where I have a ~80 point higher FICO (not FAKO) score – presumably as a result of that.  This leads me to believe that perhaps I should just pay them off, but I figured I'd ask the experts, and the people who pose as experts too  

Thoughts? 

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Welcome to myFICO.

That's a very good rate but you're still paying interest as long as the loan is open.

My advice is always to pay off any and all loans as fast as possible. Being debt free is my #1 priority.

[empiror22]

I'll offer a little different view/advice as 2.3% is crazy low, are there our debt you have or things that you were gonna get loans for in the near future? If so you probably would be better off saving your money. I'm not saying stay in debt I'm saying that at that rate you will not find any home/student / credit card rate (except for promo intro Apr) I would kill for at that rate on any loan / credit I have , I would then use the money saved for a some other item I want.
But paying it off is not that bad of an ideal as long as your not putting yourself in more debt at a higher rate soon. Also student debt tends to have some benefits as far as repayment ( term and conditions, pending loan type).
As a second note that rate is so low that you maybe able to invest and easily make more then the 2.3% your paying most of my investments make 5%-12.5% a year.

[Anonymous]

Not too mention since student loan interest is tax deductible your actual interest rate is lower. I understand liking the idea of being debt free, but you also need to think about your future and potentially how that $30k would help you more. For instance, if you want a mortgage in 18 months you're going to need 20% down to avoid PMI. Would you still be able to avoid that if you paid off your student loans? Even if you could avoid PMI, you would still be better off putting all that towards your mortgage since you are certinaly not getting a rate of less than 2.3% on a mortgage.

Investments are another option as your can average over 2.3% in most diversified index funds without a ton off risk.

[Broke_Triathlete]

If I were in your shoes I'd pay the loans off. There is no reason to hold onto $30K of debt for the sake of a credit score. I am trying to pay off my $25K in loans ASAP. I'd love to be in your shoes with the ability to pay! Your credit score will recover and if you really want an installment loan reporting open up a rebuilder installment loan for a $1,000 and keep it open for 5 years. Then re-evaluate down the road.