Source
r/CRedit•
blondeleather

Paying off loan in first payment

Car Loan

I recently bought a car. While waiting for money to transfer from checking to savings I had a family emergency which required me to drive over 100 miles that day so I bought the car with 50% down and financed the rest. I read the paperwork and there is no early repayment fee. When the dealership pulled my credit I had a 723 from equifax and a 790 from transunion. The only thing bringing my score down is that I have never had a loan.

I will pay $84 interest the first month, which was worth it to me given the situation. I figure I might as well make sure the loan helps my credit. Is there any difference on the long term impact for my credit score if I pay it off in the first month vs over several months?

Posted Sep 8, 2023, 10:30 PM UTC

13
fman258•

Banks like to see installment loans on your credit, other than that there’s no real benefit to paying interest to something that you have the cash to pay off. The only instance where it makes sense is when you can make more with the money instead of paying it off IE Stock market return of 7% on avg or a HYS. So if your loan is 4% or lower then I would keep the loan.

1
starrknowscredit•

It just depends on if you’re trying to build credit with the auto installment loan. 15% of your credit score is comprised of a mixture of credit types. This means installment loans, revolving credit lines. This also shows lenders you can handle all types of credit. If the interest rate is too high, then you may can get it refinanced through a credit union for a lower rate, or pay it off. a credit card is a great revolving line of credit and you can have it reporting forever as long as you always pay it off every due date to avoid interest and be very responsible with it.

1
blondeleatherOP•

Will it still help with credit mix if it’s paid off or only while it’s open? Refinancing isn’t really an option. I have a thin file so I’m looking at 10%+ even at credit unions.

1