pac4toon wrote:I have this personal loan that I've been paying off for almost 2 years now. The payment booklet shows that my last payment will be in August of 2017. I've been paying this loan oon time every month. My question is, should I pay off the loan early (like when I receive my tax return) or should I just continue paying it monthly?
I've heard some say "Paying off an installment loan early will most likely not hurt your score, but leaving it open and managing it through the term of the loan shows that you can manage and maintain the account responsibly over a period of time — which is very good for your credit score." AND "But if you’re thinking of paying a loan off early solely for the purpose of boosting your credit score — don’t."
What say you?
There's no single answer to this question. There are other factors at play, as Vattene indicated. It depends on whether you have other installment loans, and what type of loans they are. Do you have a mortgage as well? What about credit cards? A good mix of credit TL are frequently cited as necessary for the optimal scores. It also depends on your overall file, how thin/thick it may be. And even if there is a reduction in scores for paying it off, scores only matter if you're applying for new credit and need them to be optimal. Otherwise, they are simply for bragging rights.
I just paid off an auto loan and a personal loan will be paid off soon as well. It will be interesting to see what sort of hit, if any, I'll get upon the update of no auto loan. However, I have a very good mix of credit types, other installment loans and a very thick file, so there should be minimal impact, plus or minus.
ETA: There's also the personal satisfaction of not having a loan payment to make. Putting those funds to other use, whatever it may be, can be very rewarding in it's own right. If there's other debt that you need to tackle, taking the amount you would normally pay toward that installment loan, to reducing the other debt, can also be satisfying. If there's no other debt, then so much the better! Money to invest or save.