Pay off early or not

[Anonymous]

Hello folks, and thank you for the helpful information. After spending my entire adult life with lousy credit, I have proactively tried to improve it the last couple of years and am getting some results. Frankly, I can't believe I went so many years absolutely clueless to how it works and have nuked my credit multiple times, sigh. 

As to the question at hand, here is my situation. I have an Auto Loan on a pickup that was stolen. As I am overseas I had the vehicle which needed a major repair in storage with my Father. Unbeknownst to me, he moved the vehicle to an unsecured location from where it was stolen. Now, unfortunately, I didn't feel the need to carry insurance and my lender never required it nor picked up GAP coverage (had they pinged me I would have bought a policy). So I am stuck with eating the balance on the vehicle. Thankfully my Father who is not without means has compensated me somewhat for the vehicle so that it's not a total loss. As such I have the ability to satisfy the note now, rather than making the monthlies which I have been doing this entire time. But should I? This was a 72 month loan that now that it is on the back end with 11 payments to go is primarily principle as I've absorbed most of the interest. I am looking to purchase a home in about 14 months at the conclusion of this work contract and trying to boost my credit to the utmost. I also have a new vehicle ordered so I will have a solid year of payments on that as well before entering the housing market. But for the original loan, am I better served paying it out monthly, or should I just go ahead and pay it in one fell swoop? What would provide the greater benefit?

Thanks!

[Anonymous]

If you're buying a home in 14 months I would pay it off so that it lowers your DTI, since you'll also already have a new auto loan in your file.

Though I'm not sure why you'd bother buying another car while still overseas, that seems like something you could do after you return and after the home purchase. Because now you'll have a new auto loan with high utlization rather than an old loan with a low utilization, which will affect your score.

That said, 14-18 months is a long time in the credit world and your score could rebound very well when time to purchase a home.

If you can afford to pay off the old loan I would just to simplify your life as well as lowering your debt.

[Anonymous]

Yes, thank you for that, I was leaning towards just paying that off, though either way it would be paid off before we were mortgage shopping so wouldn't efect my DTI either way. It's already a sunk cost, the only benefit unless they find it and going on three months missing is credit related. I guess I'll also hold a title to it as an 'asset' in name only.

The new car is a necessity. We have two paid off vehicles now but both 11 going on 12 years old and one has become a constant money pit. There is no shipping cost involved for me as it is covered in my transportation agreement. I'll hit AZEO in the next couple of months and am otherwise doing all the necessary things to continue building my credit back. 

I guess mostly I was curious if there was an advantage to having it reported monthly rather than having it reported paid, as both options are available to me.