Paying off two installment loans?

[avv7c0]

Quick question, just to be sure I understand this correctly.

• My latest EQ FICO was 814, per SW.
• I allow 3-4% of my total credit card available balance to report each month on a single card.
• I have 3 student loans totalling about $20,000.
• I have an auto loan of $10,500 at 6.99%. (monthly payment: $350, 34 payments remaining)
• I have a personal loan of $1,400 at 11.99%. (monthly payment: $65, 33 payments remaining)
• I have a personal loan of $8,000 at 14.00% (monthly payment: $275, about 40 payments remaining.)

I have $11,000 available to apply to these items. The student loans are obviously off the table. The auto loan has a lower interest rate, but the car is only worth about $11,000, so I'd really like to pay it off should something catastrophic happen to it mechanically. Maybe that's stupid of me. But I guess my reasoning is that it is likely that I will be able to pay off all of these early based on my income, so the added interest may not really play out over the course of the full 40 months or what not.

Anyway, in addition to suggestions for where I should apply these payments, I would like feedback on how these payments are likely to affect my credit score, if at all. I know accounts remain on your credit report for a period of time, but eventually drop off. If I pay off multiple loans at the same time, and they both drop off my report at the same time, what is the likely impact to my AAoA? I suppose it's likely that I will have new lines of credit open by the time that happens, but of younger age as I'm not planning on opening anything in the near future. I may cosign on my wife's auto loan as we repair her credit. If so, that will be added within the next month or so.

Thoughts?

[Jazzzy]

Do you have an emergency fund? If not, some of your $11k should be put away in case of sudden job loss, unexpected illness or expense, etc.

That said...and if you do have an emergency fund in place...I'd pay off the higher interest loans first and pay the remaining money towards the auto loan. That would wipe out the 2 personal loans. Although installment loans do not impact FICO scoring the way that revolving credit does, these loans still count in your number of balances. Eliminating 2 balances may give you a bit of a bump (which you don't really need).

Then, take the amount you are paying on these 2 personal loans each month and pay down on the car loan. That should keep the car value from being upside down.

Also, don't worry about your AAoA. The paid-off installment loans will count in your AAoA for approx. the next 10 years. Paying them off won't affect that. They don't "drop off" your credit report.

[beb86]

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@Jazzzy wrote:

Do you have an emergency fund? If not, some of your $11k should be put away in case of sudden job loss, unexpected illness or expense, etc.

That said...and if you do have an emergency fund in place...I'd pay off the higher interest loans first and pay the remaining money towards the auto loan. That would wipe out the 2 personal loans. Although installment loans do not impact FICO scoring the way that revolving credit does, these loans still count in your number of balances. Eliminating 2 balances may give you a bit of a bump (which you don't really need).

Then, take the amount you are paying on these 2 personal loans each month and pay down on the car loan. That should keep the car value from being upside down.

Also, don't worry about your AAoA. The paid-off installment loans will count in your AAoA for approx. the next 10 years. Paying them off won't affect that. They don't "drop off" your credit report.

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I think I think you meant the positive history stays for ten years...it is my understanding that the account wont "vanish" after ten years and should still be accounted towards your AAoA

[avv7c0]

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@Jazzzy wrote:

Do you have an emergency fund? If not, some of your $11k should be put away in case of sudden job loss, unexpected illness or expense, etc.

That said...and if you do have an emergency fund in place...I'd pay off the higher interest loans first and pay the remaining money towards the auto loan. That would wipe out the 2 personal loans. Although installment loans do not impact FICO scoring the way that revolving credit does, these loans still count in your number of balances. Eliminating 2 balances may give you a bit of a bump (which you don't really need).

Then, take the amount you are paying on these 2 personal loans each month and pay down on the car loan. That should keep the car value from being upside down.

Also, don't worry about your AAoA. The paid-off installment loans will count in your AAoA for approx. the next 10 years. Paying them off won't affect that. They don't "drop off" your credit report.

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This is excellent advice that I hadn't thought of. Thank you so much for that. And yes, we do have a healthy emergency fund tucked away accruing interest, but this came in the form of a bonus check that I'd like to "spend" in a good way, before we even realize we have it. You know what I mean?

[Anonymous]

I agree with paying the two high interest personal loans, and then take the remaining $1500 and pay down the principle on your card.

THEN...

Oops! I didn't see that Jazzy had already suggested taking the paid off loan payments and adding it to the car payment. Great advice!!!

[MarineVietVet]

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@beb86 wrote:

I think I think you meant the positive history stays for ten years...it is my understanding that the account wont "vanish" after ten years and should still be accounted towards your AAoA

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Actually once the account drops off it is gone forever and stops helping your AAoA and credit length history.

From a BK years ago to:
EX - 3/11 pulled by lender- 835, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".