topic Re: Is it better to pay off my auto loan early or pay it to full term? in Auto Loans

Is it better to pay off my auto loan early or pay it to full term?

Lvmont — Wed, 12 Aug 2020 06:39:35 GMT

I owe $10,000 left on my car. I took out a 72month term in 2018 and I been making on time payments for the past 24 months. I have the ability to pay it completely off in one lump sum and be done with it. But I been thinking about just paying a big chunk of it and continue to make payments on it so I have good auto loan history. This is my first auto loan, and experian knocks me down for having short auto history. What are your guys opinions?

Re: Is it better to pay off my auto loan early or pay it to full term?

AllZero — Wed, 12 Aug 2020 07:14:51 GMT

What's the APR on the loan?

Will paying in advance push out the next payment due date?

Re: Is it better to pay off my auto loan early or pay it to full term?

Lvmont — Wed, 12 Aug 2020 07:33:32 GMT

8% interest rate. Depending on the amount I put towards the loan it will push out the next due date to whenever.

Re: Is it better to pay off my auto loan early or pay it to full term?

Gmood1 — Wed, 12 Aug 2020 08:54:52 GMT

@Lvmont

That's a pretty high rate. At that rate, I'd pay it off or refinance at a much lower rate.

24 months is a enough time for FIs to judge your payment history. Of course, the longer the better. But don't throw money away doing it.

Do you have any other installment loans?

If not, you'll take a temporary ding once this one reports as paid off.

Re: Is it better to pay off my auto loan early or pay it to full term?

Shooting-For-800 — Wed, 12 Aug 2020 11:39:04 GMT

Any other debt with higher interest rates?

I would make a payment every week if it pushes out the due date a month each time.

Some loans do and some don’t.

This would allow cash flow, less interest paid, and emergency fund.

Re: Is it better to pay off my auto loan early or pay it to full term?

adelphi_sky — Wed, 12 Aug 2020 11:46:56 GMT

@Gmood1 wrote:
@Lvmont
That's a pretty high rate. At that rate, I'd pay it off or refinance at a much lower rate.

24 months is a enough time for FIs to judge your payment history. Of course, the longer the better. But don't throw money away doing it.

Do you have any other installment loans?
If not, you'll take a temporary ding once this one reports as paid off.

Wait. Your credit takes a hit if you pay off a loan early?

Re: Is it better to pay off my auto loan early or pay it to full term?

Brian_Earl_Spilner — Wed, 12 Aug 2020 11:52:48 GMT

@adelphi_sky wrote:
@Gmood1 wrote:
@Lvmont
That's a pretty high rate. At that rate, I'd pay it off or refinance at a much lower rate.

24 months is a enough time for FIs to judge your payment history. Of course, the longer the better. But don't throw money away doing it.

Do you have any other installment loans?
If not, you'll take a temporary ding once this one reports as paid off.

Wait. Your credit takes a hit if you pay off a loan early?

There's a scoring penalty for not having a mix of credit if you don't have an installment loan.

Re: Is it better to pay off my auto loan early or pay it to full term?

adelphi_sky — Wed, 12 Aug 2020 12:08:45 GMT

@Brian_Earl_Spilner wrote:
@adelphi_sky wrote:
@Gmood1 wrote:
@Lvmont
That's a pretty high rate. At that rate, I'd pay it off or refinance at a much lower rate.

24 months is a enough time for FIs to judge your payment history. Of course, the longer the better. But don't throw money away doing it.

Do you have any other installment loans?
If not, you'll take a temporary ding once this one reports as paid off.

Wait. Your credit takes a hit if you pay off a loan early?
There's a scoring penalty for not having a mix of credit if you don't have an installment loan.

So, say you inherit a ton of money and pay off all your loans and credit cards, your credit takes a hit for having no active debt?

Re: Is it better to pay off my auto loan early or pay it to full term?

Brian_Earl_Spilner — Wed, 12 Aug 2020 12:14:25 GMT

@adelphi_sky wrote:
@Brian_Earl_Spilner wrote:
@adelphi_sky wrote:
@Gmood1 wrote:
@Lvmont
That's a pretty high rate. At that rate, I'd pay it off or refinance at a much lower rate.

24 months is a enough time for FIs to judge your payment history. Of course, the longer the better. But don't throw money away doing it.

Do you have any other installment loans?
If not, you'll take a temporary ding once this one reports as paid off.

Wait. Your credit takes a hit if you pay off a loan early?
There's a scoring penalty for not having a mix of credit if you don't have an installment loan.
So, say you inherit a ton of money and pay off all your loans and credit cards, your credit takes a hit for having no active debt?

You'd take 2 scoring hits. Not having a credit mix and no credit use.

Re: Is it better to pay off my auto loan early or pay it to full term?

adelphi_sky — Wed, 12 Aug 2020 12:25:10 GMT

@Brian_Earl_Spilner wrote:
@adelphi_sky wrote:
@Brian_Earl_Spilner wrote:
@adelphi_sky wrote:
@Gmood1 wrote:
@Lvmont
That's a pretty high rate. At that rate, I'd pay it off or refinance at a much lower rate.

24 months is a enough time for FIs to judge your payment history. Of course, the longer the better. But don't throw money away doing it.

Do you have any other installment loans?
If not, you'll take a temporary ding once this one reports as paid off.

Wait. Your credit takes a hit if you pay off a loan early?
There's a scoring penalty for not having a mix of credit if you don't have an installment loan.
So, say you inherit a ton of money and pay off all your loans and credit cards, your credit takes a hit for having no active debt?
You'd take 2 scoring hits. Not having a credit mix and no credit use.

Interesting. Darned if you do, darned f you don't. You have debt for years getting dinged for utilization. Pay it off, you're dinged for no utilization. lol

Re: Is it better to pay off my auto loan early or pay it to full term?

Brian_Earl_Spilner — Wed, 12 Aug 2020 12:28:37 GMT

@adelphi_sky wrote:
@Brian_Earl_Spilner wrote:
@adelphi_sky wrote:
@Brian_Earl_Spilner wrote:
@adelphi_sky wrote:
@Gmood1 wrote:
@Lvmont
That's a pretty high rate. At that rate, I'd pay it off or refinance at a much lower rate.

24 months is a enough time for FIs to judge your payment history. Of course, the longer the better. But don't throw money away doing it.

Do you have any other installment loans?
If not, you'll take a temporary ding once this one reports as paid off.

Wait. Your credit takes a hit if you pay off a loan early?
There's a scoring penalty for not having a mix of credit if you don't have an installment loan.
So, say you inherit a ton of money and pay off all your loans and credit cards, your credit takes a hit for having no active debt?
You'd take 2 scoring hits. Not having a credit mix and no credit use.
Interesting. Darned if you do, darned f you don't. You have debt for years getting dinged for utilization. Pay it off, you're dinged for no utilization. lol

That's why AZEO is pushed here. It's been found to be the best way to optimize scores. Personally, I think it's too much upkeep if not applying for anything, but I do understand the point of some to always keep scores maximized in case of an impromptu app.

Re: Is it better to pay off my auto loan early or pay it to full term?

adelphi_sky — Wed, 12 Aug 2020 12:52:49 GMT

@Brian_Earl_Spilner wrote:
@adelphi_sky wrote:
@Brian_Earl_Spilner wrote:
@adelphi_sky wrote:
@Brian_Earl_Spilner wrote:
@adelphi_sky wrote:
@Gmood1 wrote:
@Lvmont
That's a pretty high rate. At that rate, I'd pay it off or refinance at a much lower rate.

24 months is a enough time for FIs to judge your payment history. Of course, the longer the better. But don't throw money away doing it.

Do you have any other installment loans?
If not, you'll take a temporary ding once this one reports as paid off.

Wait. Your credit takes a hit if you pay off a loan early?
There's a scoring penalty for not having a mix of credit if you don't have an installment loan.
So, say you inherit a ton of money and pay off all your loans and credit cards, your credit takes a hit for having no active debt?
You'd take 2 scoring hits. Not having a credit mix and no credit use.
Interesting. Darned if you do, darned f you don't. You have debt for years getting dinged for utilization. Pay it off, you're dinged for no utilization. lol
That's why AZEO is pushed here. It's been found to be the best way to optimize scores. Personally, I think it's too much upkeep if not applying for anything, but I do understand the point of some to always keep scores maximized in case of an impromptu app.

AZEO?

Re: Is it better to pay off my auto loan early or pay it to full term?

adelphi_sky — Wed, 12 Aug 2020 16:05:41 GMT

@adelphi_sky wrote:
@Brian_Earl_Spilner wrote:
@adelphi_sky wrote:
@Brian_Earl_Spilner wrote:
@adelphi_sky wrote:
@Brian_Earl_Spilner wrote:
@adelphi_sky wrote:
@Gmood1 wrote:
@Lvmont
That's a pretty high rate. At that rate, I'd pay it off or refinance at a much lower rate.

24 months is a enough time for FIs to judge your payment history. Of course, the longer the better. But don't throw money away doing it.

Do you have any other installment loans?
If not, you'll take a temporary ding once this one reports as paid off.

Wait. Your credit takes a hit if you pay off a loan early?
There's a scoring penalty for not having a mix of credit if you don't have an installment loan.
So, say you inherit a ton of money and pay off all your loans and credit cards, your credit takes a hit for having no active debt?
You'd take 2 scoring hits. Not having a credit mix and no credit use.
Interesting. Darned if you do, darned f you don't. You have debt for years getting dinged for utilization. Pay it off, you're dinged for no utilization. lol
That's why AZEO is pushed here. It's been found to be the best way to optimize scores. Personally, I think it's too much upkeep if not applying for anything, but I do understand the point of some to always keep scores maximized in case of an impromptu app.
AZEO?

I googled it. Didn't know it was a thing until now. Funny doing a search in the forums nobody spelled it out. Weird. Anyway, it is All Zeros Except One. Which is kinda crazy and SHOULDN'T be unecessary. The silly games the credit industry makes you play when you're simply demonstrating that you can pay back what is owed in part or whole.

So, my next question is does that apply to auto loans? I have an existing auto loan. I want to buy another car. I can pay the loan off in full. should I leave 60-90 days worth of payments on the existing loan when applying for a new auto loan?

Re: Is it better to pay off my auto loan early or pay it to full term?

Lvmont — Wed, 12 Aug 2020 16:54:35 GMT

Other than the auto loan, I just have 3 credit cards with no missed payments for the past 4 years. Total CL 9700.

Re: Is it better to pay off my auto loan early or pay it to full term?

Anonymous — Wed, 12 Aug 2020 18:35:14 GMT

I'll also mention that if you do not have an Auto Loan reporting on you CR the next time you apply for one, they will consider it your first Auto Loan thus increasing your APR. A friend of mine experienced this last year when he bought his new car, and his old car had been paid off for over ten years. It wasn't an astronomical rate, but it seems it could have been lower based on the rate I got on mine. Similar scores and his slightly older AAOA should have gotten a lower rate than mine.

So if one does pay it off you probably don't want to wait a long time before another Auto purchase, if every fraction of a point is a concern.

Re: Is it better to pay off my auto loan early or pay it to full term?

adelphi_sky — Wed, 12 Aug 2020 18:40:32 GMT

@Anonymous wrote:
I'll also mention that if you do not have an Auto Loan reporting on you CR the next time you apply for one, they will consider it your first Auto Loan thus increasing your APR. A friend of mine experienced this last year when he bought his new car, and his old car had been paid off for over ten years. It wasn't an astronomical rate, but it seems it could have been lower based on the rate I got on mine. Similar scores and his slightly older AAOA should have gotten a lower rate than mine.

So if one does pay it off you probably don't want to wait a long time before another Auto purchase, if every fraction of a point is a concern.

Janus,

Thank you. I think my best play would be to have one CC with a low balance and leave two payments on my current auto loan when searching for another auto loan. However, I assume this is all a wash if your credit scores are above 750. I'd imagine you'd get a good rate regardless. I got a BMW Finance CPO loan for 0.9% and my scores were in the low 700s.