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Should I keep paying auto loan or pay it off right away?


Ippolit
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I have a 5 year auto loan, now just over 2 years to pay off left.


I have cash to pay it off with one transaction now, that would save me about $1000 in interest (3.75% over 5 years on $27K car).


If I pay it off right away, will it improve my credit score or I'd better keep paying regularly for another 2 years?


Thanks!


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That is not an easy question to answer because the different credit scores have different scoring models. If this is the only outstanding balance you have then your balance is probably a small percentage of the original loan amount. Paying it off now may have a short term bump to your score(s). On the other hand if you keep making payments on time it will increase your score over time. 

 

I wouldn't worry about your score as much as saving the money. If you will not need this money in case of an emergency I say pay it off. If this will drain your savings then you might want to do it a little slower. You will also want to make sure the loan doesn't have a prepayment penalty before you do anything. 

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