Should I pay off my auto loan?

[joestay]

I have 1 year left on my auto loan and I could pay it all off right now if I wanted to.  I only took out the loan to build my credit history because my history was limited.  If I pay it off right now, will it still be consider an active account and report for 10 more years?  Or will it be a close account?  How will this effect my credit score and history?

[fused]

Would you like me to move your post to the "Understanding FICO Scoring" forum? You'll probably receive more replies.

[joestay]

If it helps.

[MarineVietVet]

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@joestay wrote:

I have 1 year left on my auto loan and I could pay it all off right now if I wanted to.  I only took out the loan to build my credit history because my history was limited.  If I pay it off right now, will it still be consider an active account and report for 10 more years?  Or will it be a close account?  How will this effect my credit score and history?

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Once an installment loan is paid off it is considered closed. However it will continue to help your AAoA and credit length history for up to 10 years after the closing date.

In my opinion all debt should be paid off as quickly as possible without regard to scores or credit history or AAoA, etc. Being debt free is my #1 priority.

From a BK years ago to:

9/09 EX pulled by lender 802
3/10 EQ- 800
4/10 TU -772

You can do the same thing with hard work

Credit Scoring 101
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[Jazzzy]

I agree with MVV. There is no reason to pay interest if you don't have to.

The  loan will still help you out for about ten more years. I'd have it gone if it was mine.

[Anonymous]

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@MarineVietVet wrote:

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@joestay wrote:

I have 1 year left on my auto loan and I could pay it all off right now if I wanted to.  I only took out the loan to build my credit history because my history was limited.  If I pay it off right now, will it still be consider an active account and report for 10 more years?  Or will it be a close account?  How will this effect my credit score and history?

---

Once an installment loan is paid off it is considered closed. However it will continue to help your AAoA and credit length history for up to 10 years after the closing date.

In my opinion all debt should be paid off as quickly as possible without regard to scores or credit history or AAoA, etc. Being debt free is my #1 priority.

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If one were to pay all of the loan but say, 20 bucks, wouldn't that be the best of both worlds?  Sometimes there's a penalty for early pay-off, and paying off everything but a small amount would avoid that problem, too.

[joestay]

Let's say I have 12 payments left, should I pay 11 payments right now and leave the last payment when it's time to pay?

[Lel]

Jack brings up a good point - make sure there isn't a prepayment penalty on your auto loan.

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@joestay wrote:

Let's say I have 12 payments left, should I pay 11 payments right now and leave the last payment when it's time to pay?

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For my auto loan, if I prepay a lump sum, I still get billed for the next month's regular payment.  That is, I don't get to skip any monthly payments.  So if you did make 11 months' worth of payments now, you might still have to make your next (and last) regular payment the following month, and your loan will be closed out.

[joestay]

I don't have any prepayment penalty.  Once, I accidently made two payments in the same month.  I forgot I paid the day before and went ahead and paid the next day.  I didn't know about it until both payments posted.  When that happened, the next bill they sent me said "$0 was due". 

Now, I know 10% of your credit score is based on a mix of credit.  If I were to pay off my car loan, wouldn't that have an impact on my score since I would only be left with credit cards reporting?  I wouldn't have a mix of credit anymore.

[MarineVietVet]

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@Anonymous wrote:

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If one were to pay all of the loan but say, 20 bucks, wouldn't that be the best of both worlds?  Sometimes there's a penalty for early pay-off, and paying off everything but a small amount would avoid that problem, too.

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You make an excellent point Jack. I can't remember the last time I had a loan with a prepayment penalty so I didn't think about that. Thanks for reminding me.

From a BK years ago to:

9/09 EX pulled by lender 802
3/10 EQ- 800
4/10 TU -772

You can do the same thing with hard work

Credit Scoring 101
Common Abbreviations
Frequently Requested Threads
Whats In Your FICO Score