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Old 10-23-2011, 06:36 PM   #1
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Help with car loan payoff

At the beginning of this month I bought a 2008 Tundra CrewMax S/C 5.7L. I'm more than capable of making the payments on the $20000 loan I took out on it. However, my situation has changed and I'm going to be going back to school. Before I do, however, I would like to get out of debt as I probably will be taking student loans also. I've been doing a bit of reading and I'm not quite sure how to go about the truck situation. If I were to turn around and sell the truck here in a month or two and pay off the loan in one lump sum, how would it affect my credit score? This is the first loan I've taken and is the only thing I have on my credit. I know I'll come out losing a bit of money on the truck as I paid more than what I should have for it (but I'm 20 with a good paying job and felt like I couldn't live without the truck ). But the way I look at it, I'd rather lose $2000 now than have fucked up credit for the rest of my life. Obviously it would be better to sell the truck, put the money in a bank account and just have them draw the payments from that account each month but I don't think that's possible. So would it negatively affect my credit to just pay off the truck at once?
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Old 10-23-2011, 06:43 PM   #2
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you should talk to a financial planner, but in short, to my knowledge, paying off the truck in one lump sum will not hurt your credit. It will help it, but it wont help it as much as it would if you payed it according to the loan payments.
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Old 10-23-2011, 06:45 PM   #3
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All depends, read the fine print in your loan, I know with mine, there was no penalty if I paid off the loan after the first 90 days.
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Old 10-23-2011, 06:51 PM   #4
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Quote:
Originally Posted by JLink View Post
you should talk to a financial planner, but in short, to my knowledge, paying off the truck in one lump sum will not hurt your credit. It will help it, but it wont help it as much as it would if you payed it according to the loan payments.
Yeah my plan was to go to the Credit Union where I borrowed the money and talk to the lender. From my reading it seems like your credit score is boosted each time you make a payment. So making only a few payments before paying it off wouldn't increase my credit score as much as if I made the full 60 payments on it, but shouldn't negatively affect it like some have told me it will. At least that's the way I think it should be but you never know.
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Old 10-23-2011, 06:54 PM   #5
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Call up the bank where the loan was issued from, better to pay off early and save all that interest. I paid off my daughters Honda loan in 2yrs it was a 5yr loan and saved over 2 grand in interest.
Your credit should be fine, it will show up that you paid on time, and the loan was paid off.
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Old 10-23-2011, 06:59 PM   #6
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On my Wife's van we refinanced and paid it off about 2 1/2 yrs early. My credit scored jumped about 30 points. Just refinanced my truck and saved 2% or about $890 over the original loan term. In my case there were neither a early pay off fee or even a transfer fee on the loans. Well correction I did have to open a savings account with the Credit Union for a whole $5. Good credit pay offs from my experience.
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Old 10-28-2011, 09:21 AM   #7
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First, I commend you for being diligent about your credit score at an early age (assuming you are in your early 20's ). Establishing good credit, EARLY, can save you alot of heartache down the road, and too many younger dudes (and older) don't realize this. Wait until you want to get a loan for a house! You'll be happy you were thinking ahead, so good work!

I would definitely talk to a financial planner, but as long as there are no pre-payment penalties, your credit score will not take a hit for paying off early. Here's something I pulled off google for ya':

Quote:
There is no direct benefit to your credit score to pay off an installment loan early, but indirectly it could help. Installment loans are established by a contract which details the amount of money borrowed and the terms, which is a monthly payment promise over a specific period of time. For auto loans, this is typically 24-60 mos. Lenders are particularly interested to see if borrowers understand this concept; that they are to pay their payment, on time, over the length of the contract. Therefore, you receive no "credit" for paying early.
However there are indirect benefits. If your debt load goes down, you are less likely to have credit applications denied, and a denial of credit is a bad mark on our report.

Read more: http://wiki.answers.com/Q/Does_payin...#ixzz1c5bFNzM2


You may also want to check on www.clarkhoward.com. Great resource!

Good luck with your final decision, and keep up your due diligence in improving your credit score not to mention your going to school. They will both pay off in dividends down the road!

Jake
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Old 10-28-2011, 09:42 AM   #8
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Im a loan officer and review credit on a daily basis. Paying a vehicle loan off early will not hurt your score.It will basically report that you aquired a loan and paid it off early.By doing so it will free up your overall obligation alloing you to get additional credit when needed.Its great that you are being proactive about your score/credit.Often you will see younger individuals go craxy and pull credt out only to regret it when they hit there late 20's early 30's when looking for bigger credit obligations such as Home, Land and Business loans.

As for a comment that was made regarding a payment increasing your score it doesnt work like that. A credit reporting agency take a bunch of different factors in determining any one individuals credit score.

Good Luck in your decision. If you have any specific questions. Post it up and if anyone else or myself can assist. Im sure we will.
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Old 10-28-2011, 09:46 AM   #9
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Pay it off and don't worry about your credit score. Having no obligations is much better than trying to raise your credit score.
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Old 10-30-2011, 11:11 PM   #10
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Just pay it off, enjoy the super charger, and be proud that you own your truck.

Don't worry about your credit. Everyone gets so bent about credit and assumes that it is important. Credit scores are just designed by greedy bankers to rate how good of a debt slave you are. Just buy what you can pay for in cash. If you can't pay for it, you don't need it. The only exception to this rule IMO are school loans because you're investing in life-long earning potential.

I paid my tacoma off after a year and it never affected my credit, but that doesn't matter because I haven't had a use for credit for the last 5 years since I've been debt free.
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Old 12-05-2011, 07:24 PM   #11
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Quote:
Originally Posted by trib View Post
Just pay it off, enjoy the super charger, and be proud that you own your truck.

Don't worry about your credit. Everyone gets so bent about credit and assumes that it is important. Credit scores are just designed by greedy bankers to rate how good of a debt slave you are. Just buy what you can pay for in cash. If you can't pay for it, you don't need it. The only exception to this rule IMO are school loans because you're investing in life-long earning potential.

I paid my tacoma off after a year and it never affected my credit, but that doesn't matter because I haven't had a use for credit for the last 5 years since I've been debt free.
You are right and wrong. Credit was invented by greedy bankers but it is also very important because it will follow you through out your life. Unless you have the cash on you to pay off whatever you want, you will need decent credit. The credit union you financed the truck through reports your payments (whether they are on time or late) to the credit bureaus each month, over the course of a few months it should start to affect your score for the better assuming you are making on time payments. However if you default even one time it will drastically affect your score for the worse. Even more factor than this are credit card balances, and bills you owe that haven't been paid in a while. If I were in your shoes I would take the hit and sell the truck because I think school is most important in your early years.
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Old 12-05-2011, 07:48 PM   #12
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If you have a loan against the truck then there's probably a lien on the truck. If so, you cannot sell the truck until you pay off the loan first.
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