is it better to pay off a car loan , or just make payments each month....making your credit better?

Question

example , one of my friends said its better for the bank to see that i paid it each month , instead of paying it in one slump they want to know that i can pay something off each month...

Answer 1

It depends on your rate and how badly you need the credit. If you are paying over 10% on your loan and you have other debts, then pay it off, its not worth it. However, if you only have a couple items on your credit and have an acceptable rate then you may want to considet keeping it for a couple years. You may also want to consider making an extra payment on the loan, but not paying it off all at once. This will save you a bundle on interest and keep the loan on the books so you can build a good payment history.

Congrats - it sounds like you are thinking things through...

Answer 2

It is better to pay it off, just in the money you are saving. Also, if you go for other loans they want to know what installment loans you have now. So having none looks better at your debt/income ratio which is another factor in giving credit. If you do pay it off don't do it right after you got the loan, give it 6-12 months to build some positive history. If you get the loan one month and pay it off the next you have done nothing to improve your score.

But you also should look at if you have the money to pay that off do you have other debt that is higher interest. If your Auto loan is only at say 11% but you have credit cards with balances at 19%, take the money and pay off the cards first. Then any other money you may not pay off the car loan but you will make a huge dent and still save on interest.

Answer 3

Depends on the interest rate. If the rate is high, pay it off, trade the car in, and get a nicer car with the same amount for the payments (this only works if you are on the first half of the loan). If the rate is low, keep paying, as you'll make money off of the interest of your savings, and your credit score will go up.

Answer 4

You're much better off paying off the car if you can. Even if you get a loan and pay it off in a month or so, you'll still get a great credit rating.

Answer 5

It is always a good idea to pay off debt. The fact that you had a loan and paid it off will look good on your credit report. Paying it off early will save you money on interest.

Answer 6

pay it off, it looks better to have no debt on a credit check versus an outstanding loan. also, you will end up saving money in the long run when you don't have to pay the interest over a long term loan.

Answer 7

If you can afford to pay off a car loan you will be saving yourself a lot of money in interest. As far as your credit report, either way it will say "paid as agreed". Of course it will say it sooner if you pay it off.

Answer 8

Actually a good rule for improved credit is to double up on your payments if you can....you still show that you can budget and make monthly commitments, but you also show then that you can pay more than the original amount.

Answer 9

pay it off, it will still look fine and there are other ways to improve your credit. you'll be saving money by not paying interest. To get better credit get a credit card, hardly use it, but when you do pay your bills right away.

Answer 10

If you make one lump sum you aren't crediting "good" credit history. If you go pay cash for a car you aren't reporting ANYTHING to your creidt.

It's only monthly payments that are reported. It's okay to pay early/extra, but if you just buy a car outright its not doing anything on your credit.