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Old 08-28-2010, 11:36 PM #1
Jlausen
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Paying Off a Car

I recently (late Feb/Early March of this year) bought a new car, one that I could afford going to college off of my GI bill housing allowance. My payments are $235 a month, but I always pay extra ($400+) because I received an insurance settlement from an accident I was in last year.

After insurance/lawyer fees, I made out with around $24,000. After buying some things and making regular payments on my car, I have most of it left. I am currently able to pay off my car entirely, and the reason I haven't is because I don't know what it will do to me credit-wise. It's the only form of credit I've been able to accumulate, so I want to do it right. I have a store credit card, but in relation to my car I feel like it's insignificant, haha.

My Dad said I should wait to pay off my car for at least 6 months, but after that, I should do it. I didn't know if that would be better than making payments on it, even if they were payments upwards of $600+.

I know my explanation is kind of jumbled, but I wanted to give some background. Basically, I have the means to pay off my car now but I don't know if doing that would be more beneficial than making payments. Any advice would be appreciated.
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Old 08-29-2010, 05:43 PM #2
FiresofSirius
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Currently having the debt is lowering your credit score. Paying it off will have a positive impact on your debt/income ratio which plays a major part in your credit score.

Personally, I would payoff it off now and save myself the lost money (interest) you're paying in the long run.
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Old 08-30-2010, 06:46 AM #3
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Dont pay it off completely right now. but create a schedule of payments that pays it off in the near future. If you pay it off you will not have enough money in savings for emergencies. everyone needs an emergency fund. make the fund equal to six months worth of necessary living expenses. after that use the money to pay off the truck
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Old 08-31-2010, 09:48 AM #4
Jlausen
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I'll have $6k+ even after I pay it off, I get $1500 a month in a housing allowance as well, and my rent+phone bill is $700 a month, max.

I was understanding some debt was good? And the interest is what I was concerned about, but I didn't know if paying it off too soon would be bad for my credit.
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Old 08-31-2010, 06:46 PM #5
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Having a successful history of making on time payments does play into a credit score also. But it takes many successful payments to positively impact a score, where one missed payment has a larger negative impact. So in my opinion its negligible.
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Old 09-01-2010, 01:17 AM #6
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Sounds good to me. My Dad owns a business, so he's reasonably knowledgeable, but he's also prone to putting off more than he actually knows so I wanted at least some sort of outside opinion. Thanks a ton, I appreciate it.
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Old 10-08-2010, 12:48 PM #7
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What kind of terms is your car note?

If you have a low rate ; such as for example on my car 1.9 percent ; it's foolish to pay it off all at once.
Keep your cash in your pocket and put it to work for you / have as a safety net

Now if you're stuck in a 10 percent+ loan or something then perhaps look into paying it off.
Just my .02 though.



I'd imagine if you got approved for a car loan you have "credit" and paying this off will not negatively impact your credit at all only help it. Consistently on time paying it helps your score ; especially paying early.
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