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Conc wrote:I just took out an installment loan of $13900 for a used vehicle. I thought I'd get your opinions on the best strategy to both pay this off quickly (saving on interest), yet also build my FICO/auto-FICO scores by having history. I have enough cash to pay off half the loan immediately. I can pay off the other half within two to three months if I wanted to. What do you guys think: How much does the length of an installment loan's history factor in to the FICO score? For example, one strategy I was considering was paying off the whole loan except for the last 12 payments. That way, I'm paying very little interest (it's a 5 year loan with small payments) and I still have a year of installment payment history. Would there be any benefit to an approach like this? Or should I just pay it off as quickly as I want to? Thanks in advance for your opinions.
Conc wrote:Well I have fixed payments. This is an installment loan. If I prepay and pay off a large chunk of the loan, I'll still have the same monthly payments to make. There will just be fewer total payments left to pay the loan off. I can't pay down the loan and still have 5 years of payments left.
Message Edited by Conc on 06-25-2007 05:30 AM
@Anonymous wrote:If I want 2 years of history, why not pay $7500 off the loan and then just make the regular payments for the next two years? If I do this, I end up paying $826 in interest. On the other hand, if I make double payments, I end up paying $1767 in interest, more than twice as much.
If you want to save money, then pay it off as quickly as possible. On the other hand if you want to get the max FICO points pay it according to the terms of the loan. For example if the loan is 36 months, then pay it for the full 36 months.
Conc wrote:I just took out an installment loan of $13900 for a used vehicle. I thought I'd get your opinions on the best strategy to both pay this off quickly (saving on interest), yet also build my FICO/auto-FICO scores by having history. I have enough cash to pay off half the loan immediately. I can pay off the other half within two to three months if I wanted to. What do you guys think: How much does the length of an installment loan's history factor in to the FICO score? For example, one strategy I was considering was paying off the whole loan except for the last 12 payments. That way, I'm paying very little interest (it's a 5 year loan with small payments) and I still have a year of installment payment history. Would there be any benefit to an approach like this? Or should I just pay it off as quickly as I want to? Thanks in advance for your opinions.