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Seeking advice on an ideal time to pay off auto loan

animaletamer 2,081 742 September 10, 2016 at 11:05 PM in Autos
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Hi,

So, I took out an auto loan for the first time in order to build my credit score (so it would help me when I buy a house down the road). With that said, I also don't want to take the whole 48 months to pay it off as it will cost me more $, not only for the interest but the auto insurance requirement on financed cars. So, I'm hoping to hear from experienced people on this forum to know how long I should take to pay off this loan and the best way to do it. I already have a good credit, so I'm just trying to raise it if that helps. This is just an arbitrary number, but would 2 years build enough credit? If so, would it be possible for me to make a huge payment toward principal to reduce the interest right away and keep making payments with smaller interest over time? I'm financing through Subaru (I believe they use Chase). Please share any tips/success stories.

Thank you,

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#2
the sooner the better. if you can make the huge payment now and finish paying it off as soon as you can.
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#3
Quote from animaletamer View Post :
would it be possible for me to make a huge payment toward principal to reduce the interest right away and keep making payments with smaller interest over time?
It depends on the type of loan. http://www.bankrate.com/finance/a...-save.aspx
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#4
Quote from mgamer20o0 View Post :
the sooner the better. if you can make the huge payment now and finish paying it off as soon as you can.
But, if I did that, I wouldn't be able to build my credit score, no?
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#5
I'm not sure you needed the loan to improve credit score. Having a credit card and using it, paying off every month should accomplish the same thing. At least that's been my understanding.
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#6
Quote from golf247 View Post :
I'm not sure you needed the loan to improve credit score. Having a credit card and using it, paying off every month should accomplish the same thing. At least that's been my understanding.
I suppose this depends on what shape your credit score is in to begin with. Picking up and staying current on a car loan can improve your credit score, but if you already have a good credit score the bump is going to be minimal. My wife picked up 18-20 points for her latest auto loan bringing her credit score from excellent to ... excellent. woot
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#7
Open installment loans don't boost your score except for account mix ( a few meager points ) and just just before they are paid off, then you get a very large 20-30+ point boost. Once it's reported as paid the boost goes away and all it does is boost your AAoA for 7 years.

pay off revolvers first, don't worry about the auto loan or any other installments loans. They don't factor except for DTI.

if you are apping for a mortgage and need a boost and can pay down your auto loan to where it's going to be paid within 3 months you'll snag a very significant score boost.
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#8
Pay it off early and as soon as you feasibly can. The loan itself is not the best way to boost credit scores as there are many other ways to establish accounts and history over time.

This also depends on your interest rate and your cash flow.

What is your interest rate? If it is higher, then you will want to more aggressively pay it off fast.

Also make sure you don't have a pre-payment penalty. I wouldn't imagine that you do but it can happen.

Keep your cash flow open so you can save money, if you can pay this off within 3 years you are doing solid (if interest rate is low).

At least you are concerned in the right direction. Keep on going and use credit karma and other credit tools to help boost your credit. You need many accounts open for long periods of time with low credit usage and no derogatory marks. It's not rocket science and time is really the key factor.
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#9
Quote from Aseras View Post :
Open installment loans don't boost your score except for account mix ( a few meager points ) and just just before they are paid off, then you get a very large 20-30+ point boost. Once it's reported as paid the boost goes away and all it does is boost your AAoA for 7 years.

pay off revolvers first, don't worry about the auto loan or any other installments loans. They don't factor except for DTI.

if you are apping for a mortgage and need a boost and can pay down your auto loan to where it's going to be paid within 3 months you'll snag a very significant score boost.

I'll also second that loans that are to be paid off within a short period of time DO factor positively in a credit score or at least credit decision - I was surprised at my last mortgage that they could tell I had an auto loan that was going to be paid off in a few months' time.
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#10
I have never had a car loan and would only consider it if I took advantage of a 0% offer (not likely because I doubt I would ever waste my money on a brand new car). I have owned as many as 3 houses at one time -- all with mortgages. My golden rule of credit is "never use credit to buy a depreciating asset". Using a credit card can help establish a good credit score. I use credit cards to pay for everything I can to earn cash back/points/miles. Just pay the entire balance off every month and don't exceed 30% of your credit limit. Sometimes I make a payment early to make sure it gets posted before the end of the month when most banks report to the credit bureaus.
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#11
Quote from goirish View Post :
I have never had a car loan and would only consider it if I took advantage of a 0% offer (not likely because I doubt I would ever waste my money on a brand new car). I have owned as many as 3 houses at one time -- all with mortgages. My golden rule of credit is "never use credit to buy a depreciating asset". Using a credit card can help establish a good credit score. I use credit cards to pay for everything I can to earn cash back/points/miles. Just pay the entire balance off every month and don't exceed 30% of your credit limit. Sometimes I make a payment early to make sure it gets posted before the end of the month when most banks report to the credit bureaus.
Thanks but your personal values have nothing to do with the OP's question.
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