I was just curious about whether anybody had any experience with paying off their car loan early. The situation is like this: I've had this loan for about six months and I still owe about $7000.00. What I'm wondering is if I pay this loan off this early, will I have trouble getting a loan in the future for another car?

-- Larry in Western WA (karlog@rocketmail.com), October 26, 2001

Answers

depending on the agreement,, you may not save any money, but it wont show as BAD on your credit,, actually,, it should be a plus

-- stan (sopal@net-port.com), October 26, 2001.

My husband and I have always paid off our car loans early. We have saved tons of money and no one has refused us a another car loan. Make sure you check to see if there is an early payoff penalty on your loan; some loans are like this, but ours have never been. Good luck, and I highly recommend doing this if at all possible - don't give the banks more of your hard-earned money!

-- carla s. miller (carlasmiller@hotmail.com), October 26, 2001.

Hi Larry! I have worked in the consumer loan field for several years at various banks and financial institutions. As long as the loan was kept for at least three months, then it shouldn't count against you on your credit bureau. (You have a score on your credit bureau. Keeping the loan for less than 3 months can effect the score) It should actually help you and save you money. Be sure to check you loan agreement and make sure there isn't any type of "prepayment penalty". If you are dealing with a reputable company, there shouldn't be. Good luck and Congratulations!!! Lisa B.

-- Lisa B. (J5diecast@aol.com), October 26, 2001.

Only loan we've ever had was mortgage. We've always saved and then bought the car, because 1) interest rates are high, and 2) like credit card interest, not deductible. If you have credit cards (we pay them off every month, so no loan there either), that provides a valid credit record that should be enough for any lender. Also, right now, some dealers are offering 0% financing. Don't know how long that's going to continue. Yes, I guess I am a big fan of paying off loans ASAP, or borrow (with signed paperwork) from family before going "outside".

Only negative I've heard about being a cash only person is that many insurance companies are now using your credit rating (that's why they ask for your SSN, so they can run a credit check) to determine your premiums. Hopefully someone will sue on this as a class-action because I fail to see the relationship between a good credit rating (and to me, whether you pay by keeping up your loan payments or by being a cash only person should both be regarded as "good") and the possibility that you might make a claim on your insurance.

-- GT (nospam@nospam.com), October 26, 2001.

We have paid off loans early before with no deteriments to our credit. The only time was yrs ago and the bank was reluctant to offer a charge card becuase we paid off a loan early and didn't have a long record of payments.

speaking of insurance companies and credit checks..... about 6 yrs ago we read an article in the Washington post concerning insurance companies and credit checks with Allstate. Allstate had just instituted credit checks then. Their reasoning was that if you had bad creit, as was mentioned you might jsut burn the house down for insurance $.n Many folks who were behind on medical bills or similiar bills were being discriminated against and felt that were paying for the sins of those who did. I don't recall seeing a class actions suit filed.

HOWEVER.... i want to share this piece of information about our recent insurance situation: we got insurance in May on our new farm here in AR. We took out a full policy on the farm, the buildings, home, goats and bulk tank. We also asked to have insurance that pays the current replacement value in case as our dairy is our livelyhood and we wanted the milk parlor insured well. Well.... anyways, they insured us and then we paid up front 1,000 for a yr in advance. Then in Sept their underwriter came out from Mo and said that they were cancelling us because he was not able to see 2 houses from our front porch and the driveways might wash out. Hmmmmmm well, as for the 2 houses, we would have never bought the farm had we were able to see neighbors. Now we set back from the paved road about 1/2 mile but just down the road and visabile from our barn are 2 houses, can see good now with fall here. We also know for a fact our driveway is not bad, should ahve seen ours in VA with all the red mud! and to boot we never had problems with insurance there even though we lived in the woods and were 1 mile from a neighbor.

So, I believe this is some type of discrimination as we live close to a fire station, about 2 miles. The only drawback is that they have one truck. We also have a pond as well. I would definately be interested in knowing if this is an appropriate decision or not. i realize their investments, but what about ours?

-- Bernice (geminigoats@yahoo.com), October 26, 2001.

Larry,

I've been involved in vehicle financing for 25 years now. All other things being equal, there's no negative to paying your loan off early. The only advantage to keeping the loan and paying it off according to terms would be to have a longer period of "paid as agreed" payments on your credit report. If your credit is already established that won't be an issue.

The only other thing I'll suggest is that you check and compare what you're going to pay in interest vs. what you can get as a return on that same money invested elsewhere. If you can't make out that way, then go ahead and pay it off.

-- Gary in Indiana (gk6854@aol.com), October 26, 2001.

I recently paid off my loan early, after 6 months...there was no prepayment penalty, and afterwards I started receiving offers for another car loan, and lots of credit card offers! If you can pay it off early you are saving a lot of interest.

-- Alexa Krain (DrMom5775@aol.com), October 27, 2001.

Bernice,

I would go up the ladder at your insurance company. They need to give you a better reason for not insuring. If they do farm policies and it sounds like they do, these are NOT valid reasons for canceling you. They may be trying to get out of the farm policy business and that is the real reason for canceling. Go to the insurance commission (usually run by the state govt)in your state and file a complaint as well.

When we got our farm, we had been Farm Bureau members for a few years, so we went to them and they pulled the BS of a credit check and wouldn't insure us, so we cancelled our medical insurance we had with them as well. I don't know too many farmers that have picture perfect credit - they did not want one blemish on your record.

-- beckie (sunshine_horses@yahoo.com), October 27, 2001.

Just make sure they tell you the right pay-off amount. I had a horrible time with my bank because they quoted the wrong payoff amount and then insisted a couple of months later after I had my title that I still owed an additional $400. They could not explain to me how this mistake occurred and so I wouldn't pay. There was a lot of fighting back and forth and finally they said forget it.

We did finally figure out how they were off, just ashame a bank couldn't explain it to us. Basically when our loan got sold to another bank a payment went missing during the transition. A payment they said they never received, so after about a month of the check floating around I cancelled it and in my disgust for the new bank I paid my loan in full so I didn't have to deal with them.

Just at the time I paid off my loan they tried cashing the check they said they never had and thus credited my account by then came to find out that the check had been cancelled. I would have happily have paid them the $400 they claimed I owed if just someone would explain to me what happened. I figured they harrassed me every night about that missing payment that they lost and then found in the transition and charged me late fee upon late fee - for that I deserved an answer and all those late fees that they still claimed I owed to be removed. What jerks. Well Bank of America will never get my business again.

-- anita in NC (anitaholton@mindspring.com), October 27, 2001.

Larry, I would pay off everything as fast as possible and then pay only cash in the future. Also check out daveramsey.com and see if he is on the radio in your area. After 1 & 3/4 years listening to him and following his advice our family is completely debt free! I can't even begin to tell you how wonderful that feels. Good luck!

-- christi in ky (cmarshal@btown.k12.ky.us), October 27, 2001.

The article I was referring to (sorry, can't remember where it was from right now but it was this year) actually detailed the case of a woman in her 60's who was a cash only type (no credit cards, no mortgage). The insurance company was treating her for all intents and purposes as if she had BAD credit and RAISED her premiums.

That is what I feel is wrong. While there could be a link between BAD credit and higher claims, I highly doubt that there is a link between DEBT FREE and higher claims. I would like to see an independent party offer proof. This is what I think there SHOULD be a class action suit over, or at least an investigation by states' regulatory offices.

-- GT (nospam@nospam.com), October 27, 2001.

Thanks for all the great advice. The loan I've currently got is at 8.44% and the interest on my savings is only about 3.5% so I guess it makes sense to pay the loan off. Plus there is no prepayment penalty.

-- Larry in Western WA (karlog@rocketmail.com), October 27, 2001.