Hello, any help would be greatly appreciated. I just signed up for MyFICO, and have decided to finally take my credit serious. That being said, I am about to enter my final payment of loan rehabilitation of my 11 direct loans (8 subsidized, 3 unsubsidized), which total around 40K. I have the ability to pay off about 20K (half) of these loans, after they are sold and the rehabilitation is complete. Which ones do I pay off first????
I was told to pay the ones with the highest intrest, as that will help with the money aspect. I have also been told to pay the newest ones off first (2012 start date), and the leave the older ones (2008) until the end, for credit score purposes. Other then my student loans, I only have a secured capital one card, which is 6 months old, and a car payment, which is only 8 months old, all of which are paid on time.
I am worried about my credit history length being wiped out due to paying off these loans. When do I pay them off, after they go on my credit report and I see what is fixed, or do I try and pay them off as soon as they are sold. I'm really not sure what to do, as far as not messing up my credit score. Thank you
It's not clear what your goals are - are you trying to pay the least amount in interest? Are you trying to maximize your FICO score? Do you intend to get loan forgiveness on your loans? Sometimes these goals are at odds with each other so we need to know which is more important to you right now to give you advice relevant to your situation.
Also, could you list out each of your loans, the balance, and interest rate? Also are the student loans federal loans? Subsidized or unsubsidized?
6,000 6.8% Jan 2008
5,780 6.0% Aug 2008
3,271 6.8% Aug 2008
839 6.0% April 2009
6,368 5.6% Aug 2009
562 5.6% March 2010
6,561 4.5% July 2010
1,294 3.4% August 2012
2,995 6.8% March 2010
2,906 6.8% July 2010
6,685 6.8% August 2012
Car loan: 13,000 12.5% Feb 2018
Capital one secured: keep utilization below 20% september 2018
All of these loans are federal direct loans, and I plan on having 90% of them paid off in the next 2 years. I figured I would start with the unsubsidized loans, as there APR is the highest and they are the newest. My real question here, is that I only have these loans, and a car loan and one credit card, both of which are less then a year off. I'm afraid by paying all of these off, my credit history will shrink to 2-3 years, instead of 9 years plus. My goal is to start looking at buying a house next year, and my scores are approaching 600, and I dont want to mess that up. Once i come out of rehabilitation I hope these scores will increase. I know I dont make clear what I am asking, so I am sorry. I guess I'm just wondering what you guys would do in my situation. I make about 80k a year, and have never really worried about credid until recently. I have 3 20k bonuses coming in the next 3 years, and planned on using the first to pay off half my student loans.
Yes, you will save the most on interest if you attack the car loan first. It doesn't make sense to pay loans at 6-7% first rather than a loan at 12.5%. (Does the car loan have a prepayment penalty?)
Its been a month or so, and I have decided that paying these off interest first, as Sabii suggested makes the most sense. One other quick question, if I may. As of now, I just made my last rehabilitation payment, and have just recived my first retention bonus (20k). I only have 1 installment loan as of right now (my car loan), but will soon have 11 student loans as installment loans on my credit report. I want to pay my car off first, but do I wait until the student loans are updated on my credit report, or pay off the car now? I was thinking if i had 12 total installment loans showing at once (car loan and 11 student loans), then paying off the car wouldnt hurt as bad. Or should i pay off the car, my only installment loan in good standing, and wait for the student loans to come out of default?