Any Benefit in a Larger Installment Loan?

[Anonymous]

Is there any value in taking out a larger installment loan as opposed to the typical $500 loan?

A couple of weeks ago, I ended up dealing with a loan officer at Alliant Credit Union who wouldn't approve a $500 savings secured loan for 48 months. She said it was too small an amount for that long a term. Another Alliant representative acknowledged that they have some inconsistencies among their LOs, and it's clear that identical loans are often approved (several people who post on myFICO have recently been approved for such loans).

After letting it sit for awhile, I decided to go ahead an apply again, but just so I wouldn't be applying for the exact loan I did two weeks ago, I decided to deposit a little more cash and apply for a $1000 48-month loan. All it amounts to is tying up the extra $500 during the application process. I plan to immediately pay it down to the same level I was planning to the $500 loan down to, so then I would basically have exactly the same situation as I would have had with a $500 loan -- except that the original loan amount would  report higher.

Then I started to wonder, "Would there be any value in starting with an even higher amount?" I have the cash available. Would a $5000 or $10,000 loan, immediately paid down to $50 be better than a $500 paid down to $50?

I don't have any other open installment loans, so there wouldn't be any value to me in padding the utilization of other tradelines.

[Thomas_Thumb]

It's all about the balance to loan ratio. Once you are below 10% is does not matter if it is 9% or o.5%. A couple potential positives about a higher loan amount are:

1) Once you pay down to 9% there is still enough of a balance to have payments where payment is greater than processing fees.

2) If the loan was larger such as a $25k car loan then once it is substantially paid down it can act as a buffer for other new installment loans.

Qualifier: I suspect you can get a substantial benefit with an installment loan paid down to below 50%.

Sure, there is an incremental benefit to pay down to under 10% - but how much relative to 40% remaining? Again, relative to 40% - not 90% or 70% remaining.

[CreditMagic7]

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@Thomas_Thumb wrote:

It's all about the balance to loan ratio. Once you are below 10% is does not matter if it is 9% or o.5%. A couple potential positives about a higher loan amount are:

1) Once you pay down to 9% there is still enough of a balance to have payments where payment is greater than processing fees.

2) If the loan was larger such as a $25k car loan then once it is substantially paid down it can act as a buffer for other new installment loans.

Qualifier: I suspect you can get a substantial benefit with an installment loan paid down to below 50%.

Sure, there is an incremental benefit to pay down to under 10% - but how much relative to 40% remaining? Again, relative to 40% - not 90% or 70% remaining.

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Good Data.

I might add that perhaps there "could be" differences depending on one's particular credit profile such as history of other accounts etc?

Seems i recall someone on another forum once someone doing a breakdown of many different credit profiles per FICO scores and the affects of varying factors, some of which are too many to note right now, but the graphs appeared to offer a fairly close summation of what to expect on FICO scores.