Also, if I can pay it off in 1 year instead of 5..should I do it?
2007-05-13 14:09:00 · 6 answers · asked by PlasticTrees 2 in Business & Finance ➔ Credit
The lower your overall debt, the better it is for your credit rating. It also doesn't hurt to show a good payment history for any outstanding debts you have (such as car loan, credit cards, etc.), with payments either going in on time or going ahead of schedule. I'm not sure how drastically paying off the loan will help your credit, but it will definitely look good.
If you can pay it off in 1 year instead of 5, do it. The longer a loan is outstanding, the more interest you end up paying on it over the long term.
2007-05-13 14:26:42 · answer #1 · answered by Geoff L 4 · 0⤊ 0⤋
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2016-09-26 06:43:35 · answer #2 · answered by Geneva 3 · 0⤊ 0⤋
Common reasons to pay debt off early:
1. You plan on buying a house soon and need to show as few debts as possible on your credit report for your debt-to-income ratio. (Debt to income ratio shows the lender how much money you bring in versus how much goes out in bills each month, in which case you would want as few bills showing up your credit report as possible to help you easily qualify for a loan.)
2. You want to save on the interest you'll be paying out over the term of the loan.
As far as your credit report goes, generally speaking it is actually a plus, not a minus, to have a certain amount of open credit which shows up on your credit report. Your credit goes up mostly by paying your bills on time every month for a period of time. For instance, if you get a new credit card, charge up $500 bucks right away, and then pay it off completely the following month, this does nothing to help your credit, though you would think it would. But credit reporting agencies are looking for your payment HISTORY and if you have little or no payment history on particular items on your credit report, then that does not help you.
So my advice is to figure out what your end goal is and then determine how you want to approach it. If you are not plannnig on buying a house right away, and if you don't have a lot in the way of credit that appears on your credit report, then I would just make the payments as scheduled and not worry about paying off your vehicle in a hurry. This will build your credit and give you a higher score with each passing year (as long as you are never late).
2007-05-13 14:57:22 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Yes it will help your credit and it will also save you interest money.
Installment accounts, such as car loans, are scored differently then revolving accounts, such as credit cards.
Paying off an installment account (basically closing it) does not hurt compared to paying off and closing a revolving account.
2007-05-13 14:32:20 · answer #4 · answered by echo 7 · 1⤊ 0⤋
actually if you pay it off and close the account, your scores might go down. however, if you pay extra on it, as long as you don't go over 30 days late - your scores should go up as the balance on the loan goes down.
2007-05-13 14:17:29 · answer #5 · answered by Anonymous · 0⤊ 0⤋
It will help you yes. Not sure how much your talking but it will also lower your debt ratio.
2007-05-13 14:17:18 · answer #6 · answered by Someone 4 · 0⤊ 0⤋