topic Re: Pay off auto loan before applying for a new loan? in Auto Loans

Pay off auto loan before applying for a new loan?

FirstAscent — Thu, 28 Sep 2023 01:07:50 GMT

Hi everyone,

wanted to get a little advice on timing for my scenario.

I have two vehicles with two loans.
I sold one vehicle today and want to use some of the equity to pay off the second loan as well.

in November/December timeframe I will be getting a new auto loan for a new vehicle that should be arriving which I previously custom ordered.

im trying to decide, from a point perspective, if it would actually hurt my scores to have both auto loans paid off, or if I should wait to pay off the last auto loan after I get my new vehicle in a few months.

there is only about 10 months remaining on my current loan and figured I'd save a few bucks on interest even though it's fairly low at 3%. Whether I pay it off now or in a few months I don't care, so just thinking about my scores.

My current Fico8 scores range from 720-740 between the 3 bureaus

appreciate your input!

Re: Pay off auto loan before applying for a new loan?

JoeRockhead — Thu, 28 Sep 2023 01:19:04 GMT

If you don't have any other open installment loans, you're going to take a hit to your scores for no open loan. Depending on your profile and length of history, sometimes it can be significant.

Re: Pay off auto loan before applying for a new loan?

FirstAscent — Thu, 28 Sep 2023 01:22:25 GMT

That's kind of what I was thinking.

i do have a loan for a side by side (UTV) as well. I think that still counts as an installment loan as well

Re: Pay off auto loan before applying for a new loan?

JoeRockhead — Thu, 28 Sep 2023 01:29:09 GMT

That's good... instead of just paying off the remaining auto loan, you could (for science) pay it down to 4% of the original loan amount to see if you get a boost to your scores.

Re: Pay off auto loan before applying for a new loan?

FirstAscent — Thu, 28 Sep 2023 01:36:31 GMT

Interesting! Wouldn't hurt to try

Re: Pay off auto loan before applying for a new loan?

sccredit — Fri, 29 Sep 2023 15:15:27 GMT

IMO I'd take the extra and put it down on the new car. Your current 3% rate is substially lower than you will get on a new one. I'd rather carry more at 3% than 6%+.

Re: Pay off auto loan before applying for a new loan?

FirstAscent — Sat, 30 Sep 2023 05:23:29 GMT

I did consider that as well. I'll already be putting some money down and with the lowest interest rates being higher right now unfortunately it makes sense.

But on the flip side it'd be nice to have the other car paid off too since it'd be $1k extra a month in my pocket. We'll see but good idea!

Re: Pay off auto loan before applying for a new loan?

dunn2500 — Mon, 02 Oct 2023 04:51:33 GMT

@FirstAscent wrote:
Hi everyone,

wanted to get a little advice on timing for my scenario.

I have two vehicles with two loans.
I sold one vehicle today and want to use some of the equity to pay off the second loan as well.

in November/December timeframe I will be getting a new auto loan for a new vehicle that should be arriving which I previously custom ordered.

im trying to decide, from a point perspective, if it would actually hurt my scores to have both auto loans paid off, or if I should wait to pay off the last auto loan after I get my new vehicle in a few months.

there is only about 10 months remaining on my current loan and figured I'd save a few bucks on interest even though it's fairly low at 3%. Whether I pay it off now or in a few months I don't care, so just thinking about my scores.

My current Fico8 scores range from 720-740 between the 3 bureaus

appreciate your input!

hey man, arent you on GM forum, recognize the name, lol? waiting on a new 2500HD I assume

anyways, bought and sold 6 trucks in last 4 years and everytime one was paid off i took a good hit on my credit for few months, however 1 time the dealer didnt pay the whole balance and i got huge bump in my score when it reported, and when paid off i lost those pts plus another 20 or so.......everytime a loan is paid i get dinged about 20 or 30pts.......my scores are very similar to yours although history isnt

seeing how you only have 10 months left you have prolly received bumps along the way as your balance has gone down,

Re: Pay off auto loan before applying for a new loan?

FirstAscent — Mon, 02 Oct 2023 05:51:17 GMT

Haha yup I am!!

Not sure yet what the next truck will be yet but sold my 5th wheel so doing a van build!

that's a decent size hit, even if only a few months. IF I pay off this last auto loan early I'll wait until right when the Sprinter arrives.

Thanks for the insight.