Slashing a vehicles principal in half

Anonymous · ‎03-28-2019

Hi,

I am 1 year and 3 months into a truck and would like to know if I slashed the principal in half(12K), Will it adversly hurt my credit for paying the truck off too early? Any input would help and I do plan to get another vehicle for a second business. I want my DTI to be about 5% before that happens.

Thanks

Anonymous · ‎03-29-2019

First paying to less than 65% of original amount is a good thing, very good loan won't be considered new.

That's why some rather than put money down will take out larger loan and put that downpayment as the first payment instead.

It won't hurt you until the loan is reporting paid in full then it could drop score a little.

Glen_M · ‎03-29-2019

@Anonymous wrote:
... I slashed the principal in half(12K), Will it adversly hurt my credit for paying the truck off too early? Any input would help and I do plan to get another vehicle for a second business. I want my DTI to be about 5% before that happens.
...

In the short term the scoring effect should be favorable.

Paying it to under 49% of the original loan balance should recover some of the points you have lost for having a high installment balance. Not a lot, but you could notice a 5pt shift. Similarly, when it drops below 29% and especially under 9% you will also see recovery of some of those points (or in the case of <9% it would possibly be a score increase depending on other credit profile details). And as long as there are no pre-payment penalties written into your loan, it should be good in general.

On another note, it is probably in your best interest to have the loan for the business vehicle taken out on the business, not your personal credit.

Revelate · ‎03-30-2019

Where are you guys getting these percentages from?

Installment loans don’t follow revolving breakpoints, at least on the early data establishing it there were only two breakpoints found, and the one at 9% was the only one confirmed but I may have missed some information on that.