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We have 2 years left on our car payment. We are considering doubling them up for the next year so that loan will be done with prior to buying a house. Would that hurt our score after it was paid off?
My opinion, hmmm. Would decrease your DTI and you would be paying out less in interest. The account will stay on as a positive TL for 10 more years. I would say go for it if you can still save money for your down payment.
It's considered an installment loan. It has a lot less effect on your credit than revolving accounts. Pay it off like Shogun said and save yourself some money. I paid my wifes care of 13 months early last year and it had little effect on her score.
I say pay it off too. if I don't buy a new car before the end of the year, I plan to pay mine off with my tax return, or most of it at least
Yes, we can pay it off early and still save. We put a set amount in savings each month and it never gets touched. Whatever is left in checking at the end of the month also gets put into savings. There has always been enough extra in the checking at the end of each month to double or even triple the car payment.
As a mortgage loan officer, I say having installment loan debt is good. You'd be better directing any cash resources toward revolving debt if you have. If you have DTI issues, then pay it down so there is just under 10 months of payments. You don't have to count the monthly payment towards the DTI if less than 10 months is owed.
@timotiger wrote:As a mortgage loan officer, I say having installment loan debt is good. You'd be better directing any cash resources toward revolving debt if you have. If you have DTI issues, then pay it down so there is just under 10 months of payments. You don't have to count the monthly payment towards the DTI if less than 10 months is owed.
We do have another car loan, but haven't even started making payments on it, yet. We don't have any other debt, just the two car loans.
Then definitely pay that thing off. Gone, history, out of here!
@fuzzybean wrote:We do have another car loan, but haven't even started making payments on it, yet. We don't have any other debt, just the two car loans.
I'd suggest putting any extra amount you were planning on paying on the origional car loan go towards the one you just opened....
Let's say your payment is $300/month if your paying $600/month for 1 year yeah you'll pay it off a year quicker, but honestly your not going to save that much in interest at that point unless you have a HORRID interest rate.
I would put that extra payment towards the loan you JUST took out and work on getting that down. It won't be paid off by the time you go for a mortgage, the other one might be within 10 months so won't really hurt you at all. and in the end if you pay an extra 300 (or whatever your plan was) on the new loan, you'll be bringing the principle down quicker, thus meaning you'll be charged less interest so even if you only do it for a year - you'll end up saving much more in interst than you would have if you paid off the other one in 1 year.
Do the math and save yourself some cash in the long run.
@scarrollprint wrote:
@fuzzybean wrote:We do have another car loan, but haven't even started making payments on it, yet. We don't have any other debt, just the two car loans.
I'd suggest putting any extra amount you were planning on paying on the origional car loan go towards the one you just opened....
Let's say your payment is $300/month if your paying $600/month for 1 year yeah you'll pay it off a year quicker, but honestly your not going to save that much in interest at that point unless you have a HORRID interest rate.
I would put that extra payment towards the loan you JUST took out and work on getting that down. It won't be paid off by the time you go for a mortgage, the other one might be within 10 months so won't really hurt you at all. and in the end if you pay an extra 300 (or whatever your plan was) on the new loan, you'll be bringing the principle down quicker, thus meaning you'll be charged less interest so even if you only do it for a year - you'll end up saving much more in interst than you would have if you paid off the other one in 1 year.
Do the math and save yourself some cash in the long run.
The new loan is 0% interest for 60 months. The old is 9%. I guess since we have the new loan, getting rid of the older one is best.