Paying off ~ 3+ years early?

[SimpleGreen]

Maybe someone can shed some light on this for me.

I bought an '05 Silverado on January 16th 2010. Dealer financed it through Chase, 5 years/60 months. I've been paying the usual payment on it all last year.

I also have a 2008 Honda Rancher ATV. I bought it new in '08. I had no credit then so I bought it using a CD loan through my bank (Capital One). I gave them the $5700 to put in a CD, they cut me a check to give the dealer. That way I would build some credit (and it worked when it came to buying the truck).

Anyways, I'm going to finish the Honda next month (which is the CD's next maturity date) and close out the CD, and release the money back to myself. I was going to put the entire $5700 on the principal of my truck, then pay one normal payment and one principal only payment each month after wards, and depending on all unexpected things in life, pay the truck by fall/winter of this year (2011).

I hear all kinds of things about credit. Would this affect me negatively? I really don't want to drag this thing out until 2015 and I don't want to try and adjust my terms in case something where to come up and prevent me from keeping up with much higher payments.

Thanks.

 

[kcinnick]

My educated guess...

Would take a small hit on your auto enhanced score and make little to no difference on your regular FICOs.

I vote to pay that sucker off early.

 

[SimpleGreen]

My educated guess...

Would take a small hit on your auto enhanced score and make little to no difference on your regular FICOs.

I vote to pay that sucker off early.

I too was thinking it wouldn't be much to worry about. I'd take a hit to not have the payment. I could pay it off outright, right now, but that puts me a little too close for comfort on my fall back stash I've grown attached to. I would have just talked to Chase but I do not work or live near a Chase bank. As it is I'll have to straight up make plans ahead of time to visit their bank

 

[Guate_shooter]

Pay it off, keep a balance on your credit cards (pay more then the minimum), and ALWAYS keep a loan open, you will build up credit.

Hard to do it when you are young but there are ways, a CD secure loan is the way to start if you dont have nobody to co sign since your own money is at risk and thats all the banks cares about.

 

[charliepapa]

I say put it on the truck UNLESS you own a home. If that's the case, put it on the principal of the home and you can always deduct that interest on your tax return if you itemize.

If your home is paid off or you have a little equity, always borrow money for vehicles through a home equity line of credit. That way, you get the title and own the vehicle from the get-go and you can deduct the interest which is no longer deductible when borrowed from a bank using the vehicle itself as collateral.

forgot to mention, check with Chase to ensure there won't be a pre-payment penalty now or even closer to end of the note since you'll be reducing the length of time (and interest). If there is, I'd pay it all the way down through the last note and let it sit until the maturity date to avoid the penalty, depending on how much it is, which is usually a percentage of the remaining balance.

 

[SimpleGreen]

Good info to know! Thanks guys.

I'm not a homeowner and the truck is the only note I have. Actually, it's the first true bank loan I've ever taken out, not counting that CD/loan my bank set up for me.

Once Feb 23rd comes out and my CD is set free I'll go chat with a Chase banker and find out the nitty gritty. Matter of fact, I'll probably dig out all the paperwork I received from the dealer and Chase and see if anything was mentioned in there while I'm wating for the 23rd.

 

[brfd557]

Pay it off my man!

 

[Metryshooter]

Pay it off my man!

Absolutely!!

Unless you have an INCREDIBLE interest rate on your CD then you'd probably be losing money by not paying it off.

Carry a balance? I don't think so. Paying your bills on time is one of the best ways to keep your credit score up. Your score is calculated on many things including income, amount and frequency of credit used, payment consistency, and debt to income ratio.

If you have little to no debt with a good history that will help you should you ever need a loan again.

 

[SimpleGreen]

Absolutely!!

Unless you have an INCREDIBLE interest rate on your CD then you'd probably be losing money by not paying it off.

Carry a balance? I don't think so. Paying your bills on time is one of the best ways to keep your credit score up. Your score is calculated on many things including income, amount and frequency of credit used, payment consistency, and debt to income ratio.

If you have little to no debt with a good history that will help you should you ever need a loan again.

The CD I think gained $100 since 2008. I have one payment left and then I'll shut it down on its Feb 27th maturity date (I thought it was the 23rd). So, nothing amazing there.

I have a credit card through my bank. I usually just buy gas or whatever else during the month with it. Just the things I would normally buy anyways, and I just pay it before the due date. That's what my banker recommended anyways when I got it a few years ago. Dealer told me my credit was fairly good for my age, it just didn't have alot of history.

Anywho, thanks again

 

[Saftman]

I say put it toward your truck unless you have a pressing debt somewhere else. Just make sure when you hand it over to Chase that you make sure they apply it to the principal and not the intrest. I've seen that happen to a friend of mine. He finally got it straight but it was a pain in the a$$.

 

[Barney88PDC]

Pay it off, keep a balance on your credit cards (pay more then the minimum), and ALWAYS keep a loan open, you will build up credit.

Hard to do it when you are young but there are ways, a CD secure loan is the way to start if you dont have nobody to co sign since your own money is at risk and thats all the banks cares about.

That has to be the WORSE finiancial advise I have ever seen.

 

[Guate_shooter]

That has to be the WORSE finiancial advise I have ever seen.

Might be but it worked for me, I built my credit up within 3 years of moving to this country and I didnt have anybody to co sign JACK for me, no daddy or uncle who wanted to help.

 

[sandman7925]

I've paid 2 vehicles and one ATV off early. Never had a credit card. I have a good credit score. Pay it off, It won't hurt you and you will save money in interest.

 

[SpeedRacer]

I vote you blow it all on guns and ammo!

 

[sandman7925]

That has to be the WORSE finiancial advise I have ever seen.

I agree Barney.

 

[Guate_shooter]

I vote you blow it all on guns and ammo!

Booze and HUHUS sounds better!

 

[Barney88PDC]

If the only way you can get cash is through an open line of credit (a credit card) then tough times may call for tough measures. As you may have found out financial instutions usually are not willing to lend money to people with bad credit or possibly in your case no credit history. Your credit may not be bad it may simply not exist.

However, suggesting to people that it is a good idea to lose 20% or more (typical credit card interest rates) on your money is simply absurd.

Credit Cards establish relvolving credit. Showing that you have financial restraint to not go run up an open line of credit like many do. (From more than one source I have read that the average American has $8,000 of CC debit. A number that simply astonished me.) CC's do not establish that you can make a payment every month like a loan does.

For the OP the 4 wheeler loan established his credit in regards to being able to make a monthly payment. Hence why he got the truck loan without problems. Personally I prefer to pay more towards the loan with the least balance. That way once it is paid off then you are liable for less cash per month should something happen such as personal injury. Now this may not save the most money depending on what rates you have on your various loans but I look at it like cheap insurance because I am now financially less liable because now I no longer owe that amount per month. Then once that loan is paid for you can apply the amount you were paying for that loan plus the extra to the next lowest loan amount. After doing this 2 or 3 times you can see how it rapidly snowballs in your favor. The problem is many people after having paid off the first loan put the extra cash into there pocket instead of toward the next lowest loan amount.

You have to have financial restraint or you will become a slave to interest and interest rates.

 

[jimdana1942]

Ask Dave Ramsey.

 

[latech15]

Paying off everything is always a good idea, however, it may not be the best idea if your goal is to BUILD credit. Credit scores won't rise if you have no active accounts. The more active accounts that you have and are paying per the terms the more your score will grow UP TO A POINT. That point is based upon your income. If your total debt is 100 times your income, then obviously that is bad. However, if your total debt is within suggested percentages of your total income, then it will help your score.

Paying everything off and having no active accounts will not help your score but it won't hurt it either. They also look for what type of accounts, credit cards, bank loans, home loans, lines of credit, etc.

In my opinion, once you have gotten to the point where you have credit (mid 600-mid 700's credit score) the best plan is to pay everything off. You don't want to pay everything off and stop your credit score from growing if you are in the 500's.

Personally, I like the idea from above where the guy said to pay all of the monthly notes ahead of time. Go in and tell the banker that you want to spread this $6000 across all of the upcoming payments until it runs out. That way you are still building your credit, you don't have to worry about actually making the payment every month, and the money is going where it needs to be instead of liquor and huhahs.

I was a lender for almost ten years prior to my present life.

 

[SimpleGreen]

Cool. I'll talk to Chase about spreading the money across the board. Sounds like a good place to start.

As for my score, I think the dealer said it came back in the mid 700s or along those lines. I think I'll be ok just killing the truck note and just using my CC for normal monthy expenses like I always have so they'll be something going on credit wise.

I mostly just want to kill the truck quick so I can start building back up to buy a house or whatever else I decide my next move will be...and not let Chase accrue more interest than they already have.

Thanks!