Ford Motor Credit Payment Question

[EW800]

Hi Everyone,  

I recently was approved for Ford's 0% financing for a vehicle.   As expected, the loan has hit my credit reports, now showing 100% until on the account.  It is my intention to make a significant payment right away, to bring Util down, thus helping scoring a bit.  

Let's just say that my monthly payment on this account is to be $250.  For those that have dealt with Ford Credit before, can you tell me if I make a large payment early on, will they still expect the $250 payment each month, or will my amount due be $0 until the the large initial payment is basically used up?

Thanks!

[Anonymous]

Why do you want to make a large payment upfront when there is no interest?  My experience with car loans from several lenders is if you have for example a $250 monthly payment and make a $1,000 payment it will credt the next 4 payments and make the next payment due 5 months from that payment date.  Personally I would call them and ask.  On a car loan bringing down utlization won't improve your scores, making the scheduled payments on time for the life of the loan will.  For example if you paid this loan off in a few months your scores would go down because you wouldn't have an installment loan reporting.  FICO scores installment accounts totally differently than they look at CC accounts.

[Loquat]

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@Anonymous wrote:

Why do you want to make a large payment upfront when there is no interest?  My experience with car loans from several lenders is if you have for example a $250 monthly payment and make a $1,000 payment it will credt the next 4 payments and make the next payment due 5 months from that payment date.  Personally I would call them and ask.  On a car loan bringing down utlization won't improve your scores, making the scheduled payments on time for the life of the loan will.  For example if you paid this loan off in a few months your scores would go down because you wouldn't have an installment loan reporting.  FICO scores installment accounts totally differently than they look at CC accounts.

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+1  I have an auto loan with PenFed now.  If I make large payments all it does is advance my next payment due date.  If I want to have any extra applied to principle only, I have to call in to have it done.  I've heard of some lenders leaving a spot for you to make principle only payments but PenFed isn't one of them; it has to be manually done. 

[Anonymous]

So this is what im thinking...

I have a $15k balance. I have enough to pay off the loan but instead perhaps I send over $14k and let it simmer for the next three years without worrying about any missed payments?

[Anonymous]

I had a 0% loan with Ford Motor Credit.

Anything above the minumum payment was applied towards the next month's payment. I paid off my 60 month loan in about 30 months. Each time I paid more than the regularly scheduled payment, it pushed out the due date for the next payment further and further. That was a blessing for me when I was self-employed and had periods of "feast and famine." I could go for several months without making any payments at all, without being late.

[Anonymous]

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@Anonymous wrote:

So this is what im thinking...

I have a $15k balance. I have enough to pay off the loan but instead perhaps I send over $14k and let it simmer for the next three years without worrying about any missed payments?

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If you have no other debts and have good residual cash in the bank then this isn't a terrible idea.  If you have any other debts that have intrest charges that would be the better way to go from a financial and FICO score perspective as you would be able to reduce your utilization.  Your in a good position either way, you have some cash in the bank and you have a zero percent interest loan on your car so you have options which is a great thing.   I paid cash for my new car because of some of the piece of mind reasons, my accountant isn't thrilled that I tied up so much cash in a depreciating asset when low interest financing is available but in my case my interest was going to be a bit higher than I would have liked and it is great to own a brand new car outright.

[JGGM]

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@Anonymous wrote:

I had a 0% loan with Ford Motor Credit.

Anything above the minumum payment was applied towards the next month's payment. I paid off my 60 month loan in about 30 months. Each time I paid more than the regularly scheduled payment, it pushed out the due date for the next payment further and further. That was a blessing for me when I was self-employed and had periods of "feast and famine." I could go for several months without making any payments at all, without being late.

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My experience too, with FMCC. Always pay more than scheduled payment, shows next payment due of $0.00

[EW800]

Thanks for the feedback, everyone!

I agree that it probably does not make a whole lot of sense for me to want to make a large payment since I have 0% interest, however I just don't like the idea of Utilization on this account showing 100% initially.  It seems like I have read that while installment loan utilization does not carry nearly as much weight as revolving utilization when it comes to credit scoring, it does carry at least some weight when in the 90-100% range. 

Does anyone by chance have any experience with the impact of 90-100% installment utilization, vs bringing it down to the 70% range?  Does it help with scoring?

Thanks to all!  

[Anonymous]

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@EW800 wrote:

Thanks for the feedback, everyone!

I agree that it probably does not make a whole lot of sense for me to want to make a large payment since I have 0% interest, however I just don't like the idea of Utilization on this account showing 100% initially.  It seems like I have read that while installment loan utilization does not carry nearly as much weight as revolving utilization when it comes to credit scoring, it does carry at least some weight when in the 90-100% range. 

Does anyone by chance have any experience with the impact of 90-100% installment utilization, vs bringing it down to the 70% range?  Does it help with scoring?

Thanks to all!  

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After reading your post I did a search of the FIco Scoring area and there is some evidence that having a portion of an instalment loan paid below 100% increases scores.  Like much of the FICO formula world its tough to know what that is but I would submit this question to those folks and see if you can get an answer.  Perhaps that best middle ground is to pay the equivalant of a years payments, that would likely give you an indication of the bump if any you would get and give you a nice buffer in case life happens, it would also preserve some of your cash for a rainy day.

[Anonymous]

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@Loquat wrote:

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@Anonymous wrote:

Why do you want to make a large payment upfront when there is no interest?  My experience with car loans from several lenders is if you have for example a $250 monthly payment and make a $1,000 payment it will credt the next 4 payments and make the next payment due 5 months from that payment date.  Personally I would call them and ask.  On a car loan bringing down utlization won't improve your scores, making the scheduled payments on time for the life of the loan will.  For example if you paid this loan off in a few months your scores would go down because you wouldn't have an installment loan reporting.  FICO scores installment accounts totally differently than they look at CC accounts.

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+1  I have an auto loan with PenFed now.  If I make large payments all it does is advance my next payment due date.  If I want to have any extra applied to principle only, I have to call in to have it done.  I've heard of some lenders leaving a spot for you to make principle only payments but PenFed isn't one of them; it has to be manually done. 

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For them to do this do they have to take the extra payment over the phone or can they process it as an extra principle payment if you make it online?  What I find interesting with PenFed is that I have made extra payments and as you state it did just move the due date back.  However, I have my auto loan set to be paid by my NFCU checking account and PenFed still withdraws the payment even though my next due date shows as being 4 months later.