BMW M3 Forum (E90 E92)

BMW Garage BMW Meets Register Search Today's Posts Mark Forums Read

Go Back   M3Post - BMW M3 Forum > BIMMERPOST Universal Forums > Off-Topic Discussions Board
GT Haus
Post Reply
Thread Tools Search this Thread
      11-14-2012, 06:41 PM   #1
Private First Class

Drives: '08 e92 M3
Join Date: Jul 2012
Location: NJ

Posts: 163
iTrader: (1)

Paying off a loan too quickly?

I financed a large portion of my car when I was fresh out of college and had a well paying job but little cash on hand. It's a 27k 5 year loan at 4.69%. I've been making the minimum payment for 7 months and now I have enough cash on hand to comfortably pay off the balance in full which should save me something like $2000 in interest..

Is paying a loan off all at once like this bad for one's credit? Would it be wiser to make several less huge payments to complete it? Establishing good credit matters to me since my credit history is so short.

Appreciate 0
      11-14-2012, 07:06 PM   #2
Lieutenant General

persian54's Avatar
Drives: SL550. Prev: E93 M3/335i/Z435i
Join Date: Jun 2009
Location: The Valley, SoCal

Posts: 15,807
iTrader: (291)

won't hurt you at all if you pay it off

but it's always nice to have cash on hand, though the interest is a little high

i would personally pay off half, then make larger payments; just to leave some extra cash on hand.
Appreciate 0
      11-14-2012, 07:07 PM   #3

passing's Avatar
Drives: caprice wagon
Join Date: Jul 2012
Location: cruisin down the street in my '64

Posts: 404
iTrader: (4)

why dont you just catch up on the payments?

the rate isnt too bad, but if it were me id rather hold on to the principal and continue to make regular payments.
Appreciate 0
      11-14-2012, 07:34 PM   #4
amanda hor$t

Drives: a380
Join Date: Sep 2012
Location: ny ny

Posts: 208
iTrader: (0)

you don't need credit when you have cash. if you want to keep the car, pay it off. otherwise play for another few years and sell. the rate isn't too good either.

i would pay it off. only reason against is if you want to buy a house. otherwise you'll probably end up spending it on something else lol

Last edited by amanda hor$t; 11-14-2012 at 07:42 PM.
Appreciate 0
      11-14-2012, 10:00 PM   #5
Second Lieutenant

Drives: 997.2 TTS, IS-F, X5M
Join Date: Aug 2007
Location: Chicagoland

Posts: 235
iTrader: (0)

pay it off. I've been buying cars 0% down and typically paying them off quickly since I graduated from college in 2003. I pay off credit cards in full. I have student loans (1.625% interest) and a mortgage (4.0%) and my credit is still 800 something. 4.69% isn't so great and > inflation so I'd pay it off. Cash in the pocket tend to burn holes.
Appreciate 0
      11-14-2012, 10:09 PM   #6

KwlAznKid's Avatar
Join Date: Jun 2005
Location: LA/Irvine/Fremont, CA/ University of California San Diego Alum

Posts: 2,421
iTrader: (4)

Its not bad, but some banks/loan companies do have a fine if you pay it off in less than a year or something, make sure to read the fine print
BMW E92 328I /BMW E46 M3 /Mercedes Benz W209 CLK500 /BMW E92 335I(sold)/Porsche 996 911 C2(sold)/BMW E46 325CI(totaled)
Appreciate 0
      11-14-2012, 11:12 PM   #7

Nate4641's Avatar
Drives: '07 M Roadster
Join Date: Dec 2011
Location: Africa

Posts: 850
iTrader: (0)

Garage List
Most financial advisers I have talked to advised against paying off loans too quickly. The idea is that by paying off the loan too quick the company who loaned you the money doesnt make as much back from missing interest so it can negatively effect your score. Bank people make your credit score.... Same reason they say to keep a small ammount ($100 or so) on your credit cards so you dont gain much interest, but it still looks good that you make payments. Making larger than minimum payments is good as it shows you are not financially irresponsible. Having cash on hand is nice, but without credit you may not be able to buy things in the future that you dont have the cash for (house, emergency situations, ect.)
2007 ///M Roadster Interlagos Blue & Dark Beige top over Light Sepang extended leather - 19in Morr VS8.2--RPI exhaust--AFE Intake--DKF Hangers--Vibra Technics Engine Mounts--Cosmos Firewall Braces--BMW Strut Brace--Tekarbon CF Engine Cover--Aero Side Skirts--F10 M5 Knob--LeatherZ Mk4 Armrest--SmartTOP Roof Controller--Zeckhausen Racing CDV--DansDecals Reflector Decals--Clutch Stop--LED Trunk Light--Stubby Antenna
Appreciate 0
      11-14-2012, 11:35 PM   #8

Drives: o_0
Join Date: Mar 2008
Location: Suburbia

Posts: 1,071
iTrader: (0)

What other types of credit do you have out? If you have fixed payments (e.g. student loans) aside from your car loan, I think you're okay w/ paying it off. That said, that's a lot of cash to drop at once and the total you save by doing so won't offset it for a long time.
Appreciate 0
      11-14-2012, 11:38 PM   #9
Private First Class

Drives: e92 335
Join Date: Jun 2009
Location: NJ

Posts: 168
iTrader: (0)

I wouldn't want to be $2000 poorer just like that.

If you're really looking to establish credit, quadruple the payment and pay it off in another year. At that point you'd have the loan for 2 years, giving you some credit history, and you'll save a good chunk of that interest.
Appreciate 0
      11-15-2012, 01:05 AM   #10
Insert Something Witty.

Drives: 2009 328i
Join Date: Jul 2012
Location: California

Posts: 32
iTrader: (0)

It will factor into a lower Average Age of Accounts, but if you have established credit lines, it won't be a major issue. It will temporarily ding your score for 6-12 months, given it's still a fairly new account.

Not a major issue, however, if you have other well-established tradelines (credit cards, other loans, etc). And $2k is a better deal than a slight ding for a short while.
Appreciate 0
      11-15-2012, 10:59 AM   #11

Drives: 2008 E92 335i
Join Date: Aug 2008
Location: Irvine, CA

Posts: 1,458
iTrader: (2)

Garage List
Pay it off; it's a great relief to get rid of any debt
"Yeah; well, my interior is better."
Appreciate 0
      11-15-2012, 12:03 PM   #12

Ammonia's Avatar
Drives: n54 135i
Join Date: Mar 2012
Location: Fayetteville, NC

Posts: 738
iTrader: (4)

Originally Posted by grieverr View Post
I wouldn't want to be $2000 poorer just like that.

If you're really looking to establish credit, quadruple the payment and pay it off in another year. At that point you'd have the loan for 2 years, giving you some credit history, and you'll save a good chunk of that interest.
I'd do this ^

But only because you have a short credit history.

Mods: JB4 | Berk Race Axel-Back | VSRF DPs | BMS DCI | CM Meth + CMGS Controller | Stett CP | Tial BOV | RR Scoops | BMS LED AE | Matte Grills | 10% Tint | M Pedals | Blackline LCI | CSR Eyelids | Amber Overlays | Rear OEM Flaps | Seibon GTR Hood | Painted Spoiler | H-Style Front Lip | VMR V701s
Appreciate 0
      11-15-2012, 01:14 PM   #13

gatorfast's Avatar
Drives: MR E90 M3
Join Date: Jan 2008
Location: SoFla

Posts: 2,634
iTrader: (3)

At that rate I would pay if off. However, if you want to refinance to a lower rate (penfed currently offering 1.49%) then it makes more sense to keep paying it down as interest will be minimal.
Appreciate 0
      11-15-2012, 01:53 PM   #14

Drives: E90 and E65
Join Date: Jul 2005
Location: Chicago

Posts: 730
iTrader: (1)

pay it off.... cost of carry is not worth keeping it
Appreciate 0
Post Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Forum Jump

All times are GMT -5. The time now is 02:26 PM.

Powered by vBulletin® Version 3.7.0
Copyright ©2000 - 2014, Jelsoft Enterprises Ltd.,,,,,,,,, logo and trademark are properties of BIMMERPOST