Return to the Household Finances Forum | Post a Follow-Up

Pay auto loan early?

Posted by bcrawfo2 (My Page) on
Thu, May 18, 06 at 8:26

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.


Follow-Up Postings:

RE: Pay auto loan early?

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

RE: Pay auto loan early?

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.

RE: Pay auto loan early?

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.

RE: Pay auto loan early?


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

RE: Pay auto loan early?

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.

RE: Pay auto loan early?

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.

 o Post a Follow-Up

Please Note: Only registered members are able to post messages to this forum.

    If you are a member, please log in.

    If you aren't yet a member, join now!

Return to the Household Finances Forum

Information about Posting

  • You must be logged in to post a message. Once you are logged in, a posting window will appear at the bottom of the messages. If you are not a member, please register for an account.
  • Please review our Rules of Play before posting.
  • Posting is a two-step process. Once you have composed your message, you will be taken to the preview page. You will then have a chance to review your post, make changes and upload photos.
  • After posting your message, you may need to refresh the forum page in order to see it.
  • Before posting copyrighted material, please read about Copyright and Fair Use.
  • We have a strict no-advertising policy!
  • If you would like to practice posting or uploading photos, please visit our Test forum.
  • If you need assistance, please Contact Us and we will be happy to help.

Learn more about in-text links on this page here