paying car loan early.

[atc06jh]

Wow. This post came right when my fiancé is getting on me about going ahead and paying off my truck. I've had my loan for a year and two months now and I could pay it off, but it'd wipe out my savings. I had a big fat goose egg as a credit score when I got my truck because I've never had a credit card or a loan in my name, never needed it. But now I do and we are saving for a wedding/honeymoon/furniture/etc. for the end of the year and she wants my truck paid off before we get married. I'm trying to build my credit up though by paying the monthly payments, plus some. She thinks that if I pay it off early then it'll make my score go up. I'm telling her that the longer I have the loan and pay monthly, it'll make my score go up. I'm going to TRY and get her to look at everyone's posts and do a little research herself and just keep paying on my loan for another year, maybe two, then I'll pay it off.

 

[Jerry1984]

What's the interest rate? If it's ridiculously high, then that would be the only argument you should pay it off, but it won't help your credit score. My suggestion to you is not to combine accounts unless you and your fiancé do money close to the exact same way as each other. Pay the bills on a percentage based portion of incomes once you guys live together. I make more than my wife so I pay more of the bills or for my toys. It has saved so many small money arguments. Both of our parents argued about money all the time growing up so neither of us had any desire to combine accounts. She writes everything down, I write nothing down, just check online banking daily or every couple days. Good luck with financial decisions and even better luck to you at getting lucky and buying a house at the right time. That's an even bigger game that you can get lucky with or get screwed on. Ask anyone who bought a first house between 2005 and 2007. Every one does finances different so best of luck finding what works for your situation.

 

[gofishn]

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.

regarding your first paragraph. NO.
It is far better to have a $5000 credit card, use $9000, each and every month, but never allow the debt carried to ever get over $4000. IE: Pay the thing , off, weekly.

This shows that even though you only have a $5000 limit, you can play in the larger game,without coming near "going over" and your credit limit will rise.

Remember, banks WANT use all to carry debt, that is how they make their money.


Second and third paragraph is dead on Correct.. Except . . .

Far too many are concerned with paying interest, when today's rate are too low to worry about. GO back to the early 80's, Yes, paying loans , down, then, made a lot more sense.

Typical interest rates, for excellent credit rating, today, you can make more money, on investments, than you pay in interest.

Girlfriend of ours is a Doctor, Her son went to the Air Forces Academy. His parents and we discussed things, with him. Not unlike what we are doing here.

Following his Dads, and my, advice, he took out a student load, even though his education is free. Invested that money and made money on it.

Granted, we are not talking a lot of money. Less than 30K but it got him a start. He needed it, since the girl, who was to become his wife, had tons of student loan debt. I say "was to become his wife" because evidently the air force frowns on cadets marrying, until graduation.

His student loan investments paid a significant percentage of her student loan debt.

Again, as mentioned earlier, they carried a small amount, and will, for years, to establish: Long Term payment history.

They cannot buy a house, since he is still bouncing around the country.
Though that should stop, soon. IF he stops seeking out more training and qualifications.

 

[THETANK]

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.

I like what you are saying, my wife and I are flying to the Netherlands next spring free of charge (earned in 18 months) due to Airmiles. Being a wee bit older and not worrying about building credit I can honestly say the last time we carried a credit card balance (we have one between us) was July 1999

 

[atc06jh]

What's the interest rate? If it's ridiculously high, then that would be the only argument you should pay it off, but it won't help your credit score. My suggestion to you is not to combine accounts unless you and your fiancé do money close to the exact same way as each other. Pay the bills on a percentage based portion of incomes once you guys live together. I make more than my wife so I pay more of the bills or for my toys. It has saved so many small money arguments. Both of our parents argued about money all the time growing up so neither of us had any desire to combine accounts. She writes everything down, I write nothing down, just check online banking daily or every couple days. Good luck with financial decisions and even better luck to you at getting lucky and buying a house at the right time. That's an even bigger game that you can get lucky with or get screwed on. Ask anyone who bought a first house between 2005 and 2007. Every one does finances different so best of luck finding what works for your situation.

We will end up combining accounts. As of right now we could fully furnish a house and not have to borrow any money/owe the store on anything we get. Even get a good lawn mower and weed eater! But if I pay off my truck, we would have to borrow a little cash. She thinks that I can just put $400 a month into savings instead of paying my loan and it'll build back up. What she don't see if that it has taken YEARS to build it up to where it is at, not just 6 months. She has a full time nursing job and still lives at home with no bills besides car insurance so it is hard for her to get a real grip on life right now. She makes more than me as I work for the state and we are the lowest paid in the nation for a state agency (which is ridiculous). If I can get on with ATC then I'll be rolling in the dough!

 

[THETANK]

regarding your first paragraph. NO.
It is far better to have a $5000 credit card, use $9000, each and every month, but never allow the debt carried to ever get over $4000. IE: Pay the thing , off, weekly.

This shows that even though you only have a $5000 limit, you can play in the larger game,without coming near "going over" and your credit limit will rise.

Remember, banks WANT use all to carry debt, that is how they make their money.


Second and third paragraph is dead on Correct.. Except . . .

Far too many are concerned with paying interest, when today's rate are too low to worry about. GO back to the early 80's, Yes, paying loans , down, then, made a lot more sense.

Typical interest rates, for excellent credit rating, today, you can make more money, on investments, than you pay in interest.

Girlfriend of ours is a Doctor, Her son went to the Air Forces Academy. His parents and we discussed things, with him. Not unlike what we are doing here.

Following his Dads, and my, advice, he took out a student load, even though his education is free. Invested that money and made money on it.

Granted, we are not talking a lot of money. Less than 30K but it got him a start. He needed it, since the girl, who was to become his wife, had tons of student loan debt. I say "was to become his wife" because evidently the air force frowns on cadets marrying, until graduation.

His student loan investments paid a significant percentage of her student loan debt.

Again, as mentioned earlier, they carried a small amount, and will, for years, to establish: Long Term payment history.

They cannot buy a house, since he is still bouncing around the country.
Though that should stop, soon. IF he stops seeking out more training and qualifications.

to your first point no sort of as our cc company loves us and we have not carried a balance coming up on 17 years. You are thinking what in the hell is he talking about right. The bank loves us due to the high volume of purchases we make and each purchase means a vendor is paying a percentage on the sale. Make a 20,000.00 purchase and the banks receives anywhere from 200.00-600.00. Not a bad haul by the cc company yes

 

[gofishn]

Wow. This post came right when my fiancé is getting on me about going ahead and paying off my truck. I've had my loan for a year and two months now and I could pay it off, but it'd wipe out my savings. I had a big fat goose egg as a credit score when I got my truck because I've never had a credit card or a loan in my name, never needed it. But now I do and we are saving for a wedding/honeymoon/furniture/etc. for the end of the year and she wants my truck paid off before we get married. I'm trying to build my credit up though by paying the monthly payments, plus some. She thinks that if I pay it off early then it'll make my score go up. I'm telling her that the longer I have the loan and pay monthly, it'll make my score go up. I'm going to TRY and get her to look at everyone's posts and do a little research herself and just keep paying on my loan for another year, maybe two, then I'll pay it off.

Guys, even 10% interest isn't jack. Not for a credit card and not for piddly balance carry overs.

AS regards paying loans off early.

The bank spends money to give you that loan.

they had to pay bank employees, to run your report, decide to give you credit, draw up the paperwork, file the liens and archive the loan papers.


You pay that loan off, early, the bank never recoups it's loan origination fees, let alone make any money off the interest.

I know when if work and then do not get paid, it makes me mad.
Since no one, positively no one, is greedier than a banker, they go ballistic.

Some fella mentioned, earlier in this thread, his over 800 score has dropped to 790. He uses his Rewards card, to get all the rewards he can, pays everything off and carry's tiny amount.

Well, no fooling your score is going to take a hit.

The banks offer that rewards stuff to get you , in the door, but they do not want you to take advantage, of them. Banks offer that stuff, to better take advantage of YOU.

Since they control your score, within legal guidelines, they are going to penalize you, for playing their game, to well.

In this case, the guy has tons of credit but does not really use it.
Not unlike the kid, who is smart as whip, but coasts through school.
It is frustrating.

The ideal bank customer is someone who borrows money. Uses that money to make himself a ton of money. Then comes back & borrows even more money. In a never ending cycle.

I stated earlier, it is a lot like playing poker. $5 Limit, $10 Limit, $20 Limit $100 limit, etc etc. . . . and it is not really, related that much, to actual income.

In the beginning, yes, how much you can borrow, is directly related to income. But, after you show the banks how you play the game, not so much.

How else do you see these insane business Bankruptcies, in the paper or financial news?

But, we are getting far afield here.

I'm done with topic.

It's kinda like learning to make Babies.
In the End, you got to do it, for yourself, to learn what works best, for you.

Good Luck to all.

 

[gofishn]

I like what you are saying, my wife and I are flying to the Netherlands next spring free of charge (earned in 18 months) due to Airmiles. Being a wee bit older and not worrying about building credit I can honestly say the last time we carried a credit card balance (we have one between us) was July 1999

Crap! Said I was done, just a second ago.

Carry a balance is for those who want to build Credit. Even Maintain teh high score they built and , Yes, it is a valuation process. Credit score rating vs paying interest.

Then again, carrying over, a couple thousand a month, on a low interest rate card is less than most of pissaway, in gas, driving to our favorite lakes.

Wee Bit Older?

You're retired, You ARE old. Face it.
Take solace , in the fact, that you are younger than I, and I ain't retired!
So I hate you , twice over.

When my buddy retired, last summer, I told him,
"I hope you die in your sleep."


One more thing:
Those sheep, they have a reason to be nervous.
Just be glad, they are only nervous.
I swear, every time I drive by,
they are saying, "Daaad. Daaad."

I avoid all farm, nowadays.
Booze too.


Now, I am done.

 

[gofishn]

to your first point no sort of as our cc company loves us and we have not carried a balance coming up on 17 years. You are thinking what in the hell is he talking about right. The bank loves us due to the high volume of purchases we make and each purchase means a vendor is paying a percentage on the sale. Make a 20,000.00 purchase and the banks receives anywhere from 200.00-600.00. Not a bad haul by the cc company yes

That's why I said with a $5000 limit, use it for $9000 worth of purchases, each month. Pay along,e very week but carry over a balance, so banks make money, off you too.
This is far more for building than maintaining. ANd, from your posts, you know enough to know that.

Remember the old joke about the old bull and the young bull?
Banks want to get them all. Including you and I.

I mean , this time, I am D O N E

 

[DannyMK2]

We will end up combining accounts. As of right now we could fully furnish a house and not have to borrow any money/owe the store on anything we get. Even get a good lawn mower and weed eater! But if I pay off my truck, we would have to borrow a little cash. She thinks that I can just put $400 a month into savings instead of paying my loan and it'll build back up. What she don't see if that it has taken YEARS to build it up to where it is at, not just 6 months. She has a full time nursing job and still lives at home with no bills besides car insurance so it is hard for her to get a real grip on life right now. She makes more than me as I work for the state and we are the lowest paid in the nation for a state agency (which is ridiculous). If I can get on with ATC then I'll be rolling in the dough!

it really depends on the interest rate on your truck loan. chances are its less then what you would pay on a personal loan or credit card, so your better off making payments on your truck and using that money elsewhere rather then paying it off. plus the payments will build your credit if you dont have much credit history.

 

[THETANK]

Crap! Said I was done, just a second ago.

Carry a balance is for those who want to build Credit. Even Maintain teh high score they built and , Yes, it is a valuation process. Credit score rating vs paying interest.

Then again, carrying over, a couple thousand a month, on a low interest rate card is less than most of pissaway, in gas, driving to our favorite lakes.

Wee Bit Older?

You're retired, You ARE old. Face it.
Take solace , in the fact, that you are younger than I, and I ain't retired!
So I hate you , twice over.

When my buddy retired, last summer, I told him,
"I hope you die in your sleep."


One more thing:
Those sheep, they have a reason to be nervous.
Just be glad, they are only nervous.
I swear, every time I drive by,
they are saying, "Daaad. Daaad."

I avoid all farm, nowadays.
Booze too.


Now, I am done.

thanks for the early am chuckle. Usually I am still watching the tube and hit the computer around lunch but for some reason I only watched a 45 minute YouTube video (on Communism, I hate Commies) and voila here I am Oh I have driven through Iowa leisurely of coarse and let me tell you I prefer western Iowa over eastern Iowa. Lets just say I like to talk to people.

 

[wsutard1]

Im going to throw this out there. DO NOT WIPE OUT YOUR SAVINGS TO PAY OFF A VEHICLE. Vehicles are depreciating assets.

For you all naysayers, I'm not saying you should never pay off a vehicle. I am saying DO NOT WIPE OUT YOUR SAVINGS TO PAY OFF A VEHICLE.

It is far more important to have a cash buffer than to save on interest.

 

[chesafreak]

That's why I said with a $5000 limit, use it for $9000 worth of purchases, each month. Pay along,e very week but carry over a balance, so banks make money, off you too.
This is far more for building than maintaining. ANd, from your posts, you know enough to know that.

Remember the old joke about the old bull and the young bull?
Banks want to get them all. Including you and I.

I mean , this time, I am D O N E

This I do not understand. If you dont have to carry a balance then why would you ever do that? The banks and CC companies make money off each transaction that you have. There is no sense in carry a balance so they make a little extra money. I have never carried a balance on my CC I am in high 700 and low 800. So trust me it does not hurt you and I have no issue getting a CC or loan. Your credit score does not show how much you balance you carry over every month it essentially shows what your statement is.

CC are the best way to build up credit score. Just make sure not to max the limit out every month. That is the only hit i get for why my score isnt higher.

On a non credit score side. Why would you wipe yourself out to pay off a truck that im guessing is a next to nothing interest rate at a credit union. Should build up a savings reserve of 3-6 months of expenses as an emergency fund. Then put more to paying off the truck. Even better take that extra money that you could pay off the truck and put it into a 401k or IRA. Market took a hit earlier this year but is looking alright now. A simple target date fund should yield alot more then the low interest rate im sure your paying.

Edit:Looks like I was replying to 2 different people so whether credit union or not im sure the interest rate is low....

 

[DannyMK2]

This I do not understand. If you dont have to carry a balance then why would you ever do that? The banks and CC companies make money off each transaction that you have. There is no sense in carry a balance so they make a little extra money. I have never carried a balance on my CC I am in high 700 and low 800. So trust me it does not hurt you and I have no issue getting a CC or loan. Your credit score does not show how much you balance you carry over every month it essentially shows what your statement is.

CC are the best way to build up credit score. Just make sure not to max the limit out every month. That is the only hit i get for why my score isnt higher.

On a non credit score side. Why would you wipe yourself out to pay off a truck that im guessing is a next to nothing interest rate at a credit union. Should build up a savings reserve of 3-6 months of expenses as an emergency fund. Then put more to paying off the truck. Even better take that extra money that you could pay off the truck and put it into a 401k or IRA. Market took a hit earlier this year but is looking alright now. A simple target date fund should yield alot more then the low interest rate im sure your paying.

Edit:Looks like I was replying to 2 different people so whether credit union or not im sure the interest rate is low....

carrying a small balance helps you build credit and get your score up faster then simply having a credit card and paying it every month. for somebody that has no credit history and is maybe looking to apply for a mortgage or other loan in the near future, its a good way to get your score up quickly. otherwise, i see no real reason for it. i've carried a balance on my credit card for a total of 1 month years ago when money was a bit tight at one point. aside from that, i pay it off in full every month and my score is 800+.

 

[chesafreak]

carrying a small balance helps you build credit and get your score up faster then simply having a credit card and paying it every month. for somebody that has no credit history and is maybe looking to apply for a mortgage or other loan in the near future, its a good way to get your score up quickly. otherwise, i see no real reason for it. i've carried a balance on my credit card for a total of 1 month years ago when money was a bit tight at one point. aside from that, i pay it off in full every month and my score is 800+.

Carrying a balance over does not change your credit score. The CC company reports your card as snap shot of time and shows how much you owe. It does not show if you paid your card off every month. So whether you carry 100 bucks over every month or spend 100 bucks and pay it off every month there is no difference. what affects your score is on time payments and revolving credit usage(having a low balance compared to your limit).

My score just shot up recently(discover card i can see my score every month) guessing cause I just opened up a car loan. But the only thing that they ping me on is I have too many accounts with balances. Which is funny cause i only have to credit cards.

Far off from paying off a vehicle here. ha So again as I stated with a low rate on the vehicle you are better off taking that extra money and throwing it into an IRA or even a Roth before you file your taxes and can even write off the IRA contribution.