Early Pay-Off with Bad Credit

Discussion in 'Credit Talk' started by R. Brumfie, Jun 13, 2000.

  1. R. Brumfie

    R. Brumfie Guest

    I recently purchased a new car, and after putting almost half down (with 18% interest of course), I wasn't entertaining the thought of going the full 5 years on this, but I want to reestablish my credit too. The finance guy told me to pay the bare minimum for a year and a half and not try to pay it off early because it will show that I can make on time payments, then refinance it. Does this sound right, or can I make my payments plus pay extra to pay down the principle? Thanks Ro.
  2. Mo

    Mo Guest

    RE: Early Pay-Off with Bad Cre

    The finance guy is trying to rook you bigtime.

    FIRST of all, make SURE that this company will be reporting to the bureaus. Many companies who do sub-prime lending do NOT report for fear of losing you to othere companies trolling the credit files.

    Now, provided that the company reports, bear in mind that the information that is reported is the timely payment, not how much over. On an installment loan, the amount of monthly payment will be listed, and if it was paid on time. There will be no notation of "paid $100 more than payment-due amount in AUG 2000".

    It is, however a good idea, when you are in a rebuilding mode, to start building trade lines showing consistent timely payments. It would be, in my opinion, certainly be helpful to show 18 months of timely payments rather than 6 months of payments, then a pay-off.

    A final thought is to make sure that any excess payment you make is applied to the principle. It seems obvious, but in dealing with sub-prime lenders you must read, re-read, and then read again, all the small print and traps they have in their contracts.
  3. Reshod

    Reshod Well-Known Member

    RE: Early Pay-Off with Bad Cre

    Brumfield, what i did on my situation was, I got a car at 19.9% after having it for about 6 months, I refinanced it at 12.9% which greatly reduced my credit. I refinanced it through a credit union of mine that was willing to work with me due to my past installment loan history and my average credit report which has a collection from 1995. I try to pay a little extra every month and there is no notation that I am paying extra.

  4. R. Brumfie

    R. Brumfie Guest

    RE: Early Pay-Off with Bad Cre

    Thanks! The lender is Ford Motor Credit, so I will "assume" that they will report to the CRA's and I will try the refinance route in a year or so. I was just worried that the finance company would look down on the fact that I paid it off early. Thanks again.
  5. Mo

    Mo Guest

    RE: Early Pay-Off with Bad Cre

    Y'know, you might want to check on Ford reporting.....I seem to remember reading somewhere (I watch several of these kinds of boards) that Ford Motor Credit doesn't report certain kinds of its loans. Wouln't hurt to ask.
  6. Eric

    Eric Guest

    RE: Early Pay-Off with Bad Cre

    I was in a similar situation.

    Mine was a little different. I had some errors to clear off my credit report. So I financed at a high rate, then refinanced in 6 months with a local bank at like 10% after I had cleared the bad stuff off.

    My sub-prime lender did NOT report to the bureaus. It was "Superior Bank."

    On the subject of paying down the loan:

    In my opinion, paying down an installment loan at an accelerated rate has a positive effect. It shows that you manage your money well.

    It also shows on your credit that your installment balance is low. This is often used in a ratio with your income to figure out your debt:income ratio for credit consideration.

    It also builds equity, which makes it much easier to get the loan refinanced.

    Now..of course, the positive history for making your minimum payments is nothing but good (assuming it is reported-don't assume that, check), but I assume you'll get at least 2 years of history on your...say 5 year loan if you are making heavily accelerated payments.

    You might make some discreet inquiries with smaller, local banks. Bring your credit report, and ask them to just take a look at it before they put an inquiry on your credit.

    This is how I got it refinanced. I found a branch manager that personally approved it after he ran their report after looking at mine.

    Good luck.

Share This Page