Paying off a Refi

[joeyv1985]

All, 

I refinanced my car in back in October of 2019 for a 3 year loan. The original loan from Capital One was about 12% for 5 years. Ouch. Although the refi APR is lower, I would still consider it relatively high. I refinanced 1 month before a baddie dropped off my report and my credit score surged from 627 to over 700 in December. Uuuggh. With that said, I have the means to pay it off but I've been holding off because I want to show the creditors I have the means to pay off an installment loan as agreed upon.  But since I'm at the tail end of my credit repair phase, should I wait until the 1 year anniversary to pay this off? There's only $15,700(from over $20K) left on the principal. What I can also do is bring the principal down to about $2-3K and stretch it out as long as possible. Thoughts? Thank you in advance. 

[BmoreBull]

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@joeyv1985 wrote:

All, 

I refinanced my car in back in October of 2019 for a 3 year loan. The original loan from Capital One was about 12% for 5 years. Ouch. Although the refi APR is lower, I would still consider it relatively high. I refinanced 1 month before a baddie dropped off my report and my credit score surged from 627 to over 700 in December. Uuuggh. With that said, I have the means to pay it off but I've been holding off because I want to show the creditors I have the means to pay off an installment loan as agreed upon.  But since I'm at the tail end of my credit repair phase, should I wait until the 1 year anniversary to pay this off? There's only $15,700(from over $20K) left on the principal. What I can also do is bring the principal down to about $2-3K and stretch it out as long as possible. Thoughts? Thank you in advance. 

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If you pay it off and it's your only installment loan, you will probably (unfortunately) see a score drop. This is due to your credit mix. The sweet spot( if it is your only installment) is to pay it down to 8.9%. From a FICO standpoint, you'll get the most points doing this. However, I would make sure that this doesn't change the loan terms and just pushes your next payment out by a couple of years. 

[joeyv1985]

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@BmoreBull wrote:

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@joeyv1985 wrote:

All, 

I refinanced my car in back in October of 2019 for a 3 year loan. The original loan from Capital One was about 12% for 5 years. Ouch. Although the refi APR is lower, I would still consider it relatively high. I refinanced 1 month before a baddie dropped off my report and my credit score surged from 627 to over 700 in December. Uuuggh. With that said, I have the means to pay it off but I've been holding off because I want to show the creditors I have the means to pay off an installment loan as agreed upon.  But since I'm at the tail end of my credit repair phase, should I wait until the 1 year anniversary to pay this off? There's only $15,700(from over $20K) left on the principal. What I can also do is bring the principal down to about $2-3K and stretch it out as long as possible. Thoughts? Thank you in advance. 

---

If you pay it off and it's your only installment loan, you will probably (unfortunately) see a score drop. This is due to your credit mix. The sweet spot( if it is your only installment) is to pay it down to 8.9%. From a FICO standpoint, you'll get the most points doing this. However, I would make sure that this doesn't change the loan terms and just pushes your next payment out by a couple of years. 

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Hello BmoreBull,
I realize the drop is inevitable should I pay off this loan. However, I really don't see a need for a high FICO in the near future because I can't think of any big-ticket purchases that will require a high Fico score. Be that as it may, I'm really hell-bent on reaching 800 on my FICO score before the end of the year and I'm really leaning on paying down most of the principal and leaving about $2-3K. After that, I'll pay it off and suffer the consequences. It will be paid in full with no late payments and as far as I can tell, the creditors won't be too upset about that. 

[joeyv1985]

I just paid $4K towards the principal. However, you can't do this on the Wells Fargo App or Wells Fargo Website. You have to go to a branch or do it over the phone. I did the latter. What a dissapointing system for one of the largest banks inb the U.S. On top of that, I have to wait a couple of days before I can make my regular car payment. Sad. 

[BmoreBull]

Congrats on paying it down. Report back and let us know if you get any kind of score bump. Dp's are always good. Congrats again. 

[joeyv1985]

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@BmoreBull wrote:

Congrats on paying it down. Report back and let us know if you get any kind of score bump. Dp's are always good. Congrats again. 

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Thanks BmoreBull

[joeyv1985]

It looks like only the June payment showed up on my most recent(8/13)report. When I make these large principal payments in the next 7 days, it won't show up until my October report. That works for me. I may pay it all off on the 1 year anniversay of this loan which is November.