Possible to pay off car loan in a year?

[butters149]

Hello,

Just had a quick question.  Trying to buy a used 2010+ Mitsubishi Evo X.  They cost around $30-32k OTD here in Ca.  Trying to get a capital one loan, just wondering if it's possible to pay off the car in one year?  And will the interest rates be lower and better chance of approval if I choose a shorter loan period?  My bills are around $200/month and I live at home.  I make around $61k/year and have worked here for about 4 months.

Thanks!

[Luscher]

It depends. Do you have enough money to pay it off in a year. We cannot tell from the info given.

[Creditaddict]

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@butters149 wrote:

Hello,

Just had a quick question.  Trying to buy a used 2010+ Mitsubishi Evo X.  They cost around $30-32k OTD here in Ca.  Trying to get a capital one loan, just wondering if it's possible to pay off the car in one year?  And will the interest rates be lower and better chance of approval if I choose a shorter loan period?  My bills are around $200/month and I live at home.  I make around $61k/year and have worked here for about 4 months.

Thanks!

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Where is this car at?

Have you applied to Cap1 already and gotten a rate offer from them?

what is your credit score? Baddies?

These days most likely your rate discounts willl come at 24-36 month, 36-48 month and 48-60 or 48-72... so most likely no reason to take out loan for less than 36 but could certainly pay it down in a year if that's what you wanted to do.

[14IS4]

PenFed has interest rates of 0.99% for up to 36 months on used cars. That being said it is always best to keep your payments at a reasonable monthly payment incase something happens. You can always pay more but you can't pay less on your loan. 

Lets take it at $32k OTD with TT&L with 0% financing you're looking at payments of around $2670/month that is before gas and insurance. I'm guessing you're pretty young from what you've described so plan on more expensive insurance for that vehicle around $200-300/month. Then plan on getting around 20 MPG so you'll have to budget a little more for gas because an Evo X is not a car you buy to putt around town in. Say you got 0.99% financing that would put you at $2700/month plus just say $200 for insurance and $150 for gas. That puts you at over $3000/month just for your car and at $61k/year you're probably bringing home after taxes around $3500-$3700/month.

The bank is less likely to give you financing for a shorter period of time just because of how much of your monthly income that eats up. My suggestion would be to go with a 48-60 month loan and pay it off early. The one thing you have to worry about though is how they charge their interest, you want to find a loan that you don't get charged the full interest if you pay it off early.

You have only been at the job for 4 months and a lot of things can change very quickly. If you lost your job could you afford to make larger payments for 3 months or 6 months? 

[butters149]

My credit score isn't that great, around 570 according to credit karma.  I applied to Cap1 in the past and approved at 17% for $29K.  My take home income is around $3700-3800 per month.  Im currently 28, turning 29 by the time I get the car.  I've never had any accidents or made any claims to insurance companies before so my driving record is perfect.  Hopefully this will lower the insurance.  

I'm confused by what you mean by them making me pay the full interest if I pay it off early?  Can you give an example?  

Cheers,

[14IS4]

I wouldn't trust your Credit Karma score, mine has always been off. How long ago did you apply for the CapOne financing? 17% on a $29k loan is almost $5k just in interest. What I was talking about earlier is that some loans you basically pay interest monthly. Say you had a 60 month loan and you paid it  off in a year, in this situation you would make 12 payments with interest every payment of $82. That would be a total of $986 for interest and say it was paid off at the end of the 12 months. The other situation they make you pay the 17% interest on the total amount of the car no matter if you pay it off early or not. The payoff amount of the car would be $33,930 on a $29k loan meaning all 17% of the interest would have to be paid no matter what.

Your driving record definitely helps but the car plays a big factor when insurance companies determine their rates. I would call your insurance company with a VIN from a car that you're looking at to get an estimate of what you'll pay. You're going to get lumped in with all the 18 year olds in Evo X's that get a bunch of tickets and have expensive wrecks. I know a bunch of insurance agents and a couple of years ago was talking to one about expensive vehicles to insure. At that time an early 2000's Eclipse was the most expensive vehicle to insure no matter the driving record for their company because it was the vehicle that was most often stolen. There are a number of factors besides your age and driving history that go into rates for particular vehicles. Again that is per insurance company so I suggest you shop around to all the major insurance companies. I currently pay $185/month for my 2013 Golf R and the next cheapest insurance company for me is $450/month. If it weren't for my insurance company I wouldn't be driving my car at all. I have a 2014 Audi S4 on order and my insurance is going to drop to around $100/month for insurance even though it's a newer car that costs twice as much as my current one.

[enharu]

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@butters149 wrote:

Hello,

Just had a quick question.  Trying to buy a used 2010+ Mitsubishi Evo X.  They cost around $30-32k OTD here in Ca.  Trying to get a capital one loan, just wondering if it's possible to pay off the car in one year?  And will the interest rates be lower and better chance of approval if I choose a shorter loan period?  My bills are around $200/month and I live at home.  I make around $61k/year and have worked here for about 4 months.

Thanks!

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it is possible.

the only difference is that your monthly payments will be higher. if you are on a non-permanent visa in the US, certain companies will require shorter loan terms that will finish before your visa expires. Other than that, you are free to choose your own loan duration.

Chances of approvals will remain the same. Only a bigger downpayment can influence your chances of approval. The bigger the downpayment, the more likely and better rate you're able to negotiate, since it reduces risk on the financing company's end.

[butters149]

I applied for capital one back In September, it was when I had few late payments on record and a high revolving credit.  I have since got one company to drop off due to GW letters and will have a 1-10% revolving credit by mid-February.  No derogatory remarks. 

Just for fun, I just got an insurance quote from all-state for the vehicle and it is $160 for basic and $206 for their enhanced.  This was because it said the car had a security system on it, and I had two other discounts for good driver.

[14IS4]

That's good to here.. I would probably wait until you hit your 1-10% util rate before you go apply for a loan. Also as the post above said a good way to get that interest rate down is from a down payment. It might help to wait a few months until you get a sizeable one since and put around $10k down and I guarentee your interest rate will drop.

Yeah I always keep the enhanced policy going and $200 seems about right for that car and your good driving record.