Pay off installment loan early

You may think paying off an installment loan early will improve your score. Doing so shouldn't hurt it, but many experts advise that early repayment of a long-term installment loan likely won't help your score either, especially if you're only a few payments into the loan. What's your own opinion.

Facebook Twitter LinkedIn Telegram Whatsapp Pocket
May 27, 2020 1:24 PM

“I just want to be done with this debt.” If you’ve ever had a large loan or credit card balance, it’s possible that this thought has crossed your mind. Making monthly payments can be a pain, and the thought of what could happen if you miss a payment can be frightening — which is why some borrowers pay off longer-term installment loans as quickly as possible.

May 27, 2020 1:28 PM

“I just want to be done with this debt.” If you’ve ever had a large loan or credit card balance, it’s possible that this thought has crossed your mind. Making monthly payments can be a pain, and the thought of what could happen if you miss a payment can be frightening — which is why some borrowers pay off longer-term installment loans as quickly as possible.

May 27, 2020 1:28 PM

Member

According to Equifax, one of the three major credit reporting bureaus, "a record of steady payments throughout the life of the loan may be more beneficial to your score than paying it off early." Why? Because about a third of your credit score is based on making consistent, on-time payments.

May 27, 2020 1:29 PM

Open and active accounts are scored more highly than closed accounts because they demonstrate that you are managing credit well now and not just in the past .... if you’re making your monthly payments on your installment loans on time and in full, then each month you’re fortifying a healthy credit score.

May 27, 2020 1:31 PM

So while there are certainly good reasons to pay off a long-term installment loan early, just keep in mind boosting your credit score may not be one of them.

May 27, 2020 1:32 PM

Living with debt is an expensive and super stressful experience. Though the road may seem long, paying off debts and loans will strengthen your financial future. Nearly every type of loan can be paid off early and there are a few different ways to go about it.


You may choose to make larger monthly payments, multiple payments each billing cycle, or – if available – you may even choose to pay off your loan in one lump sum right then and there. Each of these strategies will, of course, do the job of paying off a loan but you should read the fine print before you decide because some debts may have a pre-payment penalty.

May 27, 2020 1:35 PM