Pay auto loan early?

bcrawfo2May 18, 2006

Trying to improve credit (and needed loan to get a little nicer car). Loan term is 3 years, bad interest rate...just under a year into the loan, want to think about paying it off. If I pay off early will the loan stay on credit report for the full term as opened (and providing good payment benefit) or does it close (stop reporting) when I pay it off?

Trying to weigh the benefit vs cost of interest.


Thank you for reporting this comment. Undo

Hi bcrawfo2,

What kind of rate are you paying?

Like somewhere around 12 - 15%?

Not up to 20%, I hope.

Do you have some funds that you can tap into in case of emergency?

Lacking such, could you borrow some funds temporarily from your bank/credit union? Are you sure? Even in case of layoff? At what rate?

What other destination do you have in mind for the money?

Fist thing in my mind when I read your post was ... "Pay off the &$%#)@ loan!".

I've been getting an offer about 3 times a year from a (foreign-owned) banking system ... They'll lend me up to $3,500. - maybe more if I call them right away! ...."

Yeah, right!

At what interest rate?

Well, about 30%, regular rate - could be adjusted. A bit.

I told them to quit sending them, as I have a fully secured line of credit at my financial institution that would charge me, if I called upon it (and I'm not using it at present) 4.25%, last time I asked, three or four months ago - probably slightly higher now.

I was a bit rude to him ... and he chastised me.

Imagine - a small loan outfit chastising a member of the public for being somewhat rude when discussing small loans and interest rates!? It's usually the other way around!

Hope you're having a reasonably happy week.

ole joyful

    Bookmark   May 18, 2006 at 1:43PM
Thank you for reporting this comment. Undo

If you pay off the loan it should be reported to the credit agencies as paid off.

Make sure there's no pre-pay penalty.

Don't see any reason not to do it, unless it'll leave you w/o any cash at all.

    Bookmark   May 19, 2006 at 4:27PM
Thank you for reporting this comment. Undo

The loan is about 17%. The total loan was about $3000, so the interest portion of the payment isn't that high. We (just about to get married) were hoping that the loan would help improve her credit (some mistakes in the past).
Trying to figure out if getting the loan and paying it off early is as good as getting the loan and let it go full term (with on-time payments).

Paying this off won't be a burden and won't put us at risk for an's just not paying the interest vs trying to improve credit. Those are the variables.

    Bookmark   May 20, 2006 at 7:01AM
Thank you for reporting this comment. Undo


If you have some funds on hand for emergencies, I'm inclined to suggest that you pay off te loan - if there are no prepayment penalties.

In the light of your impending marriage - do you have all of the financial bases covered, there? Quite often there turn out to be some unexpected expenses in that game.

Good wishes to you and your loved one - I hope that you have many happy years together.

ole joyful

    Bookmark   May 20, 2006 at 7:40PM
Thank you for reporting this comment. Undo

Wathx out for 'rule of 78s' loansm (in the accouting world also known as 'sum of the years digits'). These have signifiacnt penalties for paying off early because of the way interest on the remaining balance is computed.
If you can invest at a better rate do not pay off the loan.

    Bookmark   May 21, 2006 at 8:10PM
Thank you for reporting this comment. Undo

I think your credit rating is determined by the amount of debt you are carrying versus your earnings, savings, etc. Whoever loans you money makes an assessment of your ability to repay the loan based on these variables. I do not think prepaying a loan will hurt you, and with less debt you may be eligible for a larger loan and/or a better interest rate.

    Bookmark   January 16, 2009 at 8:27PM
Sign Up to comment
More Discussions
Ontario - Canadian law question
Hi: I am hoping I can find someone on the forum who...
Buying a new house financial questions?
This seems silly, but I don't have anyone else to talk...
help!!! advice needed asap for 2nd mortgage
I need to take out $30,000 in equity for desperately...
Private College Savings - How much is enough?
We have approximately $62,000 saved in a 529 plan for...
Programmable Thermostat proof
Does anyone have hard copy proof of the savings that...
Sponsored Products
Juno Trac 12 150 Watt 12 Volt White Canopy Transformer
Lamps Plus
Ingo Maurer | Lucellino Table Lamp
$675.00 | YLighting
Zephyr 48W in. Okeanito Wall Mounted Range Hood - COK-E48BSX
KOHLER Bathtubs Bancroft 5 ft. Right Drain Bathtub in White K-1150-RA-0
Home Depot
1950s Pay Phone - CR56-BC
$69.95 | Hayneedle
Blue 3528 Single Row LED Strip Light 240/m 10mm wide 5m Reel
SW 5050 Single Row CC LED Strip Light 60/m 12mm wide 6m Reel
Terzani | Magdalena Large Pendant Light
© 2015 Houzz Inc. Houzz® The new way to design your home™