topic Re: Pros vs Cons of Paying Off Auto Loan 7 Months Early? in Auto Loans

Pros vs Cons of Paying Off Auto Loan 7 Months Early?

BrownSugah66 — Thu, 01 Jun 2023 22:31:46 GMT

Happy mid-year 2023 everyone! You awesome myFICO contributors have always come through for me by sharing valuable experience, knowledge and advice....soooo, i'm coming back with a new question that I am hoping to obtain advice/opinions on. I am currently in a position to pay off my auto loan 7 months early. The loan was originally approved for 75 months at 9.60% interest (I was in a credit rebuilding stage at the time) and, as of today, has a pay-off amount of $4,500 (15.9% UTIL). I have 1 other debt consolidation installment loan with SOFI, opened in February 2022 for 48 months and 14% interest. Therefore, if I pay off the auto loan, I will still have another installment loan. Here's my question......if I go ahead and pay of the auto loan early, should I expect a big hit to my credit score? All 3 of my scores are currently sitting at 678 - 689. If my scores take a significant hit, how long does it take for the bounce-back to happen?....or does it even happen?

Re: Pros vs Cons of Paying Off Auto Loan 7 Months Early?

pizzadude — Fri, 02 Jun 2023 13:39:43 GMT

@BrownSugah66 wrote:
Happy mid-year 2023 everyone! You awesome myFICO contributors have always come through for me by sharing valuable experience, knowledge and advice....soooo, i'm coming back with a new question that I am hoping to obtain advice/opinions on. I am currently in a position to pay off my auto loan 7 months early. The loan was originally approved for 75 months at 9.60% interest (I was in a credit rebuilding stage at the time) and, as of today, has a pay-off amount of $4,500 (15.9% UTIL). I have 1 other debt consolidation installment loan with SOFI, opened in February 2022 for 48 months and 14% interest. Therefore, if I pay off the auto loan, I will still have another installment loan. Here's my question......if I go ahead and pay of the auto loan early, should I expect a big hit to my credit score? All 3 of my scores are currently sitting at 678 - 689. If my scores take a significant hit, how long does it take for the bounce-back to happen?....or does it even happen?

Since you have another open installment loan I don't think your scores will take much of a hit How much interest would you avoid paying on your auto loan if you paid it in full now ? I'd weigh that against the amount of interest that you're currently paying on your consolidation loan. It might make sense to throw the $4.5K against the installment loan balance if it will save you more interest in the long run.

Re: Pros vs Cons of Paying Off Auto Loan 7 Months Early?

BrownSugah66 — Fri, 02 Jun 2023 14:25:55 GMT

@pizzadude ...Thank you for your response! Yep, i've considered applying the $4.5k towards paying down the SOFI balance but my thought was that I would just pay extra towards the SOFI loan each month using the money I would have paid towards the car loan. That way, I could at least feel an immediate sense of progress towards paying down/off my outstanding and nagging debt. I just don't want my FICO scores to take a nose dive from this strategy. I appreciate your advice and continue to consider the options.

Re: Pros vs Cons of Paying Off Auto Loan 7 Months Early?

pizzadude — Fri, 02 Jun 2023 17:22:06 GMT

Understood, it's always a good feeling to pay down debt and eventually pay in full. I don't know the amount you have outstanding on the consolidation loan but given that it's at a higher rate and not close to payoff, it seems like your best use of the money would be to pay it down now versus the auto loan which should save you hundreds ( maybe more? ) in future interest payments.

Re: Pros vs Cons of Paying Off Auto Loan 7 Months Early?

NoMoreE46 — Thu, 27 Jul 2023 01:42:39 GMT

If paying off the Auto loan, there might be an opportunity for a slight gain with a change in your insurance coverage. Most lenders require 'full coverage' with $### deductible.

I am not suggesting that you would lower your coverage (and raise your deductible) but going this route Could be a manner to reduce the insurance premium when you own the vehicle outright...

Re: Pros vs Cons of Paying Off Auto Loan 7 Months Early?

MeredithLepore — Mon, 31 Jul 2023 06:38:34 GMT

You'll likely benefit more from putting the $4500 toward the consolidation loan, and when paying either loan off in full, your score will probably only benefit as you will still have the other installment loan on your report. When both are paid in full, you may see a slight dip, but you'll also be debt-free! Which is well worth it.

Re: Pros vs Cons of Paying Off Auto Loan 7 Months Early?

dunn2500 — Sat, 07 Oct 2023 07:15:40 GMT

would probably pay off the higher intrest first

i have 6 CC and 2 installment loans and took a hit on my credit when i traded 1 truck in for another while the motorcycle loan was still open during both.....it bounced back because of the new truck loan most likely

Re: Pros vs Cons of Paying Off Auto Loan 7 Months Early?

AzCreditGuy — Tue, 10 Oct 2023 02:06:27 GMT

@BrownSugah66 wrote:
@pizzadude...Thank you for your response! Yep, i've considered applying the $4.5k towards paying down the SOFI balance but my thought was that I would just pay extra towards the SOFI loan each month using the money I would have paid towards the car loan. That way, I could at least feel an immediate sense of progress towards paying down/off my outstanding and nagging debt. I just don't want my FICO scores to take a nose dive from this strategy. I appreciate your advice and continue to consider the options.

Are you able to tell me if your SOFI loan is coding as a CFA? Not to derail your thread, but this is one of the reason why I dont want to get an auto loan and have them fees, inquiry and ability to pay off the loan early. I took out a Sofi loan for 6 years and ended up paying it off in 2 years, when I found out it coded as CFA