topic Re: Paying off first car loan before opening second? in Auto Loans

Paying off first car loan before opening second?

Anonymous — Mon, 15 May 2017 23:09:29 GMT

Currently shopping for another car, as I have sold my older one for $10k. I wish to apply that 10k to a car loan I just opened one year ago, with $13k left. The new vehicle I am shopping for will be around $25k. I have the car loan at a local credit union, and I am checking to see if I can apply that amount to the principal without any penalties.

Would it be better to pay off that loan first, or try to roll in the old car loan in with the new one?

Credit score last checked is mid 700's

Income $65k a year

Renting at $850/month

Current debts 800/month including current car loan

Re: Paying off first car loan before opening second?

Anonymous — Mon, 15 May 2017 23:12:23 GMT

I have just received this update from my credit union:

"When you make your payment, after the interest is satisfied, the rest of the payment goes towards paying down the principal. If you were to make a payment larger than your minimum, all of the additional payment will go to the principal. Since the interest is accrued daily, the extra payment would need to be made the same day. There are no penalties for early payoff."

Re: Paying off first car loan before opening second?

Anonymous — Mon, 15 May 2017 23:19:06 GMT

Be aware if you pay off your car loan and have no other installment loans reported, your FICO scores will drop -- for high FICO scorers, it can drop 30-40 points!

Best to roll it into the new loan so you always have a loan reporting.

Re: Paying off first car loan before opening second?

Watchmann — Wed, 17 May 2017 18:13:43 GMT

@Anonymous wrote:
Be aware if you pay off your car loan and have no other installment loans reported, your FICO scores will drop -- for high FICO scorers, it can drop 30-40 points!

Best to roll it into the new loan so you always have a loan reporting.

I would never keep a loan open that accures interest just to keep my FICO scores up, that is just wasting money. Unless you will be shopping for another loan soon a drop of 30 pts or so won't make any difference to your life.