paying car loan early.

[Hemipower95]

Will paying a car (truck)loan early affect my credit? I am just starting to build credit, and i want to pay my car loan early by paying more towards principal. I would really apreciate some answers. My loan is through a credit union, btw. If that matters.

 

[Statcher1]

It would be best to check with them on this.

I know with who my wife's car is financed through there's no penalty for early payments or early pay-off.


Sent from the Rocket in my Pocket

 

[EagleChief]

Short answer, no. Just don't make late payments.

Now, do you mean "pay the loan off early", or "pay the monthly payments before they are due, early"?

Paying the loan off early will actually save you money, as you won't be paying as much interest as you would over the life of the loan. If you are just paying a few days or a week early every month, that won't change anything. All you are doing is paying the monthly payment before the actual due date, which doesn't matter to the credit union.

Check with your credit union, though. They can fully answer any questions you have. I have seen some loans that had penalties for early pay-offs... it's been a LONG time since I've seen that, though.

 

[bryan28]

I have paid loans off early and have taken a 1-2 point hit on my credit report just because I no longer have that line of credit available to me. It's nothing major though. I'd rather pay it off and avoid interest any day. I would check the fine print on the loan though and see if there's a penalty for paying it off early. I doubt it sinceuyou used a credit union but I'd still check.

 

[gofishn]

Not all Credit Unions report to the Big 3 Credit Reporting Services.
If you have had your loan, for a few months now, pull a credit report from freecreditreport DOT com and see if the loan shows up. IF not, may want to think about getting a different loan, at a bank that does report.

Paying it off early does not hurt your credit, as long as it is not too early.
Keep it for a year, two preferably.

IF you want to learn more, browse Credit Forums. Credit Karma comes to mind, but I am sure there are many others.

 

[gofishn]

Remember you, from another thread, saying you were only 21 yrs old.

Friend of teh family was President of regional bank, this is how he explained credit, to me, when I was your age, decades ago.

Get a credit card. Use it. Pay it ALMOST off, each month, but always carry over a slight balance. Roughly, 10% of your available credit limit.

After doing this for a few months, you score should rise.
After one year, get a better credit card. Better being lower interest rate.
Keep your original credit card. Use every once in awhile, never carrying more than 10%.

Use your new card, for everything and pay it off, every month, except for that last 10% of your limit.


Credit is essentially a Game. They want to know how long you have been playing the Game. IE: how old are your accounts.

How well do you play the game. IE: How much credit "Debt Payment" can you handle. NOTE: that is not always related to income.


Think of it as Poker, some play $5 limit, some play $20 Limit, some play $100 limits . . . you get the idea. Where do you play and how do you play.

How much debt do you carry, month to month.

Keep your credit inquires low, applying for credit causes a credit Inquiry.
Too many Inquires looks like you NEED new credit.

Keep a couple account, for no other reason than their account age.
Until you buy a home, credit card is a great way to achieve this.

If you got questions, ask. we will try to help.
Be careful it is easy to get into credit trouble.

 

[gofishn]

One more thing

BE CAREFUL

Only person more crooked than a Car Dealer, is a Lawyer
Only person more crooked than a Lawyer, is a Banker.

I know, I got all three in my family tree.
Too darn many, actually.

 

[jmr]

Pay it off early and save from paying that interest on the loan.

 

[reek]

I usually pay off my car loans very aggressively and as early as possible, just because the credit hit is minor vs the amount of interest you end up saving. Now, if I get the 0% interest, I take my time since I can put the money into other investments, etc. And if you really want to get petty, the longer you keep the 0% going, the better since annual inflation rate is not 0%.

anyway, I keep 2 additional credit cards with ridiculous limits and use mainly my 3rd USAA card. Mainly do this to keep the available credit amount high and the carried balance is a smaller percentage of my overall available credit. As stated, it's a game.

 

[jackblackjeet]

Remember you, from another thread, saying you were only 21 yrs old.

Friend of teh family was President of regional bank, this is how he explained credit, to me, when I was your age, decades ago.

Get a credit card. Use it. Pay it ALMOST off, each month, but always carry over a slight balance. Roughly, 10% of your available credit limit.

After doing this for a few months, you score should rise.
After one year, get a better credit card. Better being lower interest rate.
Keep your original credit card. Use every once in awhile, never carrying more than 10%.

Use your new card, for everything and pay it off, every month, except for that last 10% of your limit.


Credit is essentially a Game. They want to know how long you have been playing the Game. IE: how old are your accounts.

How well do you play the game. IE: How much credit "Debt Payment" can you handle. NOTE: that is not always related to income.


Think of it as Poker, some play $5 limit, some play $20 Limit, some play $100 limits . . . you get the idea. Where do you play and how do you play.

How much debt do you carry, month to month.

Keep your credit inquires low, applying for credit causes a credit Inquiry.
Too many Inquires looks like you NEED new credit.

Keep a couple account, for no other reason than their account age.
Until you buy a home, credit card is a great way to achieve this.

If you got questions, ask. we will try to help.
Be careful it is easy to get into credit trouble.

This is just about perfect. I just came off a 2 year plan of fixing my credit and these are the rules. Average age of accounts, percent credit usage, and paying on time are the heavy hitters on the score....credit inquiries hit hard for the first few months and fall off after two years.

 

[bryan28]

I know you didn't ask how to earn credit but this has worked for me. Get a high limit credit card (no matter the interest) with no annual fees and never use it. Get 2 or 3 as long as they have no annual fees. You never have to use them but having the available credit and utilizing none of it improves your credit. Credit Karma shows that i have a certain number of accounts open and I'm utilizing zero percent of my available credit and it shows it's a good thing. Having credit but having high balances is not good.

 

[Informal]

Pay it off early and save from paying that interest on the loan.

It depends on what interest rate he has... The last 3 vehicles I bought, were not financed... My newest truck I financed.. My credit union had such a ridiculous 5 year rate, That it was damn near free money.

If the rate is right, It's hard to go wrong with the extra $$ in the bank.

 

[lonestar21]

Best bet is to check with your credit union. I know some penalize you if you pay your loan early. Just call and ask the simple question and they'll tell you how to go about it

 

[wsutard1]

Wow you guys. Everyone missed the point here. The dude is trying to build his credit. Go from nothing (low) scores, to something (preferably 800s). Best thing you can do for yourself is get and maintain a high credit score.

Anyway, setting a trend with paying your loan on time will do more for your score than paying off your vehicle right now. Paying it off will do zero for your score. Paying your monthly payments on one will help increase it.

Other pieces of advise on here are also good. They just didn't answer your question specifically.

 

[Informal]

Wow you guys. Everyone missed the point here. The dude is trying to build his credit. Go from nothing (low) scores, to something (preferably 800s). Best thing you can do for yourself is get and maintain a high credit score.

Anyway, setting a trend with paying your loan on time will do more for your score than paying off your vehicle right now. Paying it off will do zero for your score. Paying your monthly payments on one will help increase it.

Other pieces of advise on here are also good. They just didn't answer your question specifically.

Not enough info in the OP's post.

Did he buy the truck with a co-signer?
Does he have any credit cards?
Any skid-marks from previous credit related endeavors?

I went from no credit rating at all at 18... to buying a new truck (with a substantial down-payment) and a credit card or two.. and had a FICO over 700 by the time I bought my first house (2 years or so later)

I don't know if or how the parameters have changed since then.
I know it's pretty simple if you pay your bills on time and keep you DTI ratio intact.

I still maintain that unless his interest rate is ridiculous, It's far better to make the payments (as you stated) than to pay it off early.

 

[ptuttle78]

I have my loan through TDECU, and I tried paying early. Then I got hit with a late fee, cuz it was 10 days too early [emoji24]


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[adrianp89]

To build credit he should NOT pay it off too early. Those history of payments can be valuable early on.

 

[Gymkata]

Creditors look at a variety of factors, but two of the important ones are your credit limit and your utilization ratio. For example, it is better for your credit if you spend $1000 a month on a credit card with a $5000 limit than if you get close to maxing out a card with a $1000 limit monthly.

As for a car loan, you would probably be best served to pay the loan down faster, but keep a small balance and pay that smaller balance off at the end of the term of the loan, instead of paying the entire loan off early. If you have a $10,000 car loan that counts against your utilization ration. Once the car loan is paid off, the amount of credit you have goes down by $10,000 and this raises your utilization ratio.

The way I understand it, with a $1000 credit card balance and $5000 credit card limit and a $1000 car loan balance on a $10,000 car loan you have a utilization of $2,000/$15,000 (13%). If you paid off the car loan your utilization would become $1,000/$5,000 (20%).

If there are any experts here, please correct me if I'm wrong.

 

[DRkNESS]

All of this great advice, and yet we've heard nothing back from the op. Not that I'm saying he should constantly be on here, but when you ask a question, please be available to answer back.

 

[Jerry1984]

My question to some of these responses are wouldn't you be paying interest every month on credit card balance that you roll over each month? One guy said to have at least one card roll 10% of the limit over each month, well interest rates are generally pretty high so you would have to weigh and balance the benefits of needing to raise your credit score vs paying interest. My credit score used to be above 800 and is now around 790. I use my credit card for most everything and then pay it off every month just for the rewards points. Earned about $1000 in 2 or so years. I have a low interest credit card that I will put things on if I am going to carry the balance for a few months, but it offers no rewards. I'm sure it's not great for improving credit score but I try to have no credit card balance. Like has been said before it's a game, one that can be very frustrating if you go down the wrong path early. Have many friends who are still screwed because of the choices they made 10-15 years ago.