Is it smart to pay off a car loan early?

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asked Apr 14, 2019 in Buying & Selling by CaterpillarSick (300 points)
Is it smart to pay off a car loan early?

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answered Apr 14, 2019 by LindaHartzell (26,630 points)
Paying off a car loan early is not entirely a bad idea but it's not always a good idea either.

If you pay off the car loan early you will have the debt paid off but you won't increase your credit score much like you would if you keep the car loan for the full term of the loan.

If you continue to pay the car loan over the length of the loan term you build a credit and payment history which helps to raise your credit score over the payments of the loan.

It shows a good payment history but if you pay off the car loan early then you won't build that credit and payment history.

So I would personally recommend keeping the loan for the full loan term length to build the credit history.

Also if you pay off your car loan early then you might pay an early loan payoff fee although you'll save money in interest charges over the life of the loan.

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