Will paying off my car early hinder my ability to build credit?
Don't fuss about your credit score when you're paying 9%. Get rid of the loan as fast as you can. Period. No. Credit scores are primarily built by doing the following: To build credit, get a few major credit cards and a couple of store cards. Use one of them to make routine purchases like gas and groceries. Pay them on time every month. You're good to go. I would hate to sell stocks to pay off a loan -- try finding a better loan. If you financed through the dealer, try joining a credit union and see if you can get a better rate. 1) How long have you had the car?  Generally, accounts that last more than a year are kept on your credit report for 7 years, while accounts that last less than a year are only kept about 2 years (IIRC - could someone correct me if that last number is wrong?). 2) Who is the financing through?  If it's through a used car dealer, there's a good chance they're not even reporting it to the credit bureaus (I had this happen to me; the dealer promised he'd report the loan so it would help my credit, I made my payments on time every time, and... nothing ever showed up.  It pissed me off, because another positive account on my credit report would have really helped my score).  Banks and brand name dealers are more likely to report the loan. 3) What are your expected long term gains on the stocks you're considering selling, and will you have to pay capital gains on them when you do sell them?  The cost of selling those stocks could possibly be higher than the gain from paying off the car, so you'll want to run the numbers for a couple different scenarios (optimistic growth, pessimistic, etc) and see if you come out ahead or not. 4) Are there prepayment penalties or costs associated with paying off the car loan early?  Most reputable financiers won't include such terms (or they'll only be in effect during the first few months of the loan), but again it depends on who the loan is through. In short: it depends.  I know people hate hearing answers like that, but it's true :)  Hopefully though, you'll be able to sit down and look at the specifics of your situation and make an informed decision. 12% is ridiculously high and routine for loans with no credit history, esp. from the dealer. I don't think though paying off would hurt your credit - you've already got installment loan on your report, and you have history of payments, so it shouldn't matter how long the history is (warning: this is kind of guesswork compiled from personal experience and stuff read on the net, since officially how credit score calculated is Top Secret).  If you have the loan and credit card with good payments, only thing you need to build credit is time (and, of course, keeping everything nicely paid). Of course, if you could find a loan with lower rate somewhere it's be great to refinance but with low credit you would probably not get the best rates from anywhere, unfortunately.
If you have no credit score it is generally far easier and more affordable to establish credit the cheapest way possible, which is usually in the form of a small credit card (student card if you are a student, low credit line unsecured, or even secured if you need). Your local bank/credit union will usually be keen to offer you something to start out, but you can also apply online to some of the major credit card vendors. As always, look out for annual fees, etc. In general, trying to get a larger loan to establish credit will cost you a lot as you will not qualify for any legitimate 0% or ultra-low APR car loans - those are reserved for people with established and generally pretty good credit. I expect you'll find a car loan that will have a lower APR than you could get investing your money otherwise - especially if you do not have established excellent credit - to simply be a phantom (you won't find it), and even if you could it is more risky than it is worth. Furthermore, if establishing credit is important to you (such as for buying a house down the road), you can build an excellent credit score without ever having a car loan. So you don't have to buy a car on borrowed money just to hope to get approved for a house some day - it's just not a requirement. Finally, I urge you to make a decision on the best car for you in your situation, ignoring the credit score - especially if you are more than 3-5+ years away from buying a house. Everything else about buying a car is more important - the actual cost of the car, year, mileage, suitability for your needs, gas mileage, maintenance and insurance costs, etc.  Then, at the very end of your decision making process, ensure that buying the car would not put you dangerously low on savings by squeezing your emergency fund. Decide if you really need a loan or as expensive of a car, considering the costs over the expected life of you owning the car (or at least the next 2-5 years). Never get trapped into just thinking about monthly payments, which hide the true cost of loans and buying beyond what you can afford to purchase today. "I think so.  I am doing this with our furniture.  It doesn't cost me any more money to pay right now than it will to pay over the course of 3 years, and I can earn interest on the money I didn't spend. But know this: they aren't offering 0%, they are deferring interest for 3 years.  If you pay it off before then great, if you don't you will owe all the accumulated interest. The key with these is that you always pay it, and on time.  Miss a payment and you get hosed.  If you don't pay on time you will owe the interest that is being deferred.  They will also be financing this through a third party (like a major bank) and that company is now ""doing business with you"" which means in the US they can call you and solicit new services.  I am willing to deal with those trade offs though, plus, as you say, you can always pay it off. WHY THEY DO IT (what is in it for them...) A friend of mine works for a major bank that often finances these deals here is how they work. Basically, banks do this to generate leads for their divisions that do cold calls.  If you are a high credit, high income customer you go to a classic bank and request cash, if you are building credit or have bad credit, you go to a ""financial services"" branch.  If you tend to finance things like cars and furniture, you get more cold calls." Imagine that your normal mode of using credit gets you a score of X. As time goes by your score trends upward if the positive items (length of credit) outweigh your negative items. But there are no big increases or decrease in your score. Then you make a one time change to how you use credit. If this is a event that helps your score, there will be a increase in your score. If it is bad thing your score will drop. But if you go back to your standard method of operating your score will drift back to the previous range. Getting a car loan for a few months to get a bump in your credit score, will not sustain your score at the new level indefinitely. Overtime the impact will lessen, and the score will return your your normal range. Spending money on the loan just to buy a temporary higher credit score is throwing away money. The dealership is getting a kickback for having you use a particular bank to finance through. The bank assumes you will take the full term of the loan to pay back, and will hopefully be a repeat customer. This tactic isn't new, and although it maybe doesn't make sense to you, the consumer, in the long run it benefits the bank and the dealership. (They wouldn't do it otherwise. These guys have a lot of smart people running #s for them). Be sure to read the specifics of the loan contract. There may be a penalty for paying it off early. Most customers won't be able to pay that much in cash, so the bank makes a deal with the dealership to send clients their way. They will lose money on a small percentage of clients, but make more off of the rest of the clients. If there's no penalty for paying it off early, you may just want to take the financing offer and pay it off ASAP. If you truly can only finance $2500 for 6 mos, and get the full discount, then that might work as well. The bank had to set a minimum for the dealership in order to qualify as a loan that earns the discount. Sounds like that's it. Bonus Info: Here's a screenshot of Kelley Blue Book for that car. Car dealers get me riled up, always have, always will, so I like doing this kind of research for people to make sure they get the right price. Fair price range is $27,578 - $28,551. First time car buyers are a dealers dream come true. Don't let them beat you down!  And here's more specific data about the Florida area relating to recent purchases: The problem is that the reason you find out may be that you are at the car dealer, picked out a car, and getting ready to sign the loan papers with your supposedly good credit, and you are denied for late payment on loans you didn't know you have.  Or debt collectors  start hounding you.  Or you credit card interest rates go up.  Or you are charged more for your insurance because you are seen as a bad credit risk.  Or you can't rent an apartment.  The list is almost endless. It can takes many months and hours spent on the phone to fix these things. From what I have heard on Clark Howard if you pay your balance off before the statement's closing date it will help your utilization score.  He has had callers confirm this but I don't have first hand knowledge for this to be true.   Also this will take two months to make the difference.  So it will be boarder line if you will get the benefit in time.   Sign up for credit karma if you like.  You can get suggestions on how to help your score. If you pay it off before the cycle closes it will look like you have 100% available credit.   So if you credit card statement closes on the 7th pay it off on the 6th in full don't pay it when its due 2/3 weeks later. Then after three months of doing that your credit score will go up based on the fact that your debt ratio is so low.  That ratio is 30% of your credit score.  It will help quite alot. "Paying off a loan early isn't a bad thing.  Having a credit card for 6 months and then closing it is probably unneeded; pay it off and then keep it as an emergency card.   The key is debt:available credit ratio.  Look at this article for example which explains the different elements; the only one you're affecting here is the second, your debt load.  If you're not planning on asking for another loan in the next six months, none of this really matters - assuming you are paying it off for sure, in six months, your debt will be gone and your credit score recovered from any hit it takes (and if you get a $1500 credit card and only put $300 on it, it might actually improve your credit). But having an open $1500 credit card with a 0 balance will probably improve your credit rating, unless you have a really high amount of available credit.  It will improve your debt/credit ratio (ie, total $ you owe divided by total $ you could put on your CCs/revolving credit). This is all aside from the ""is it a good idea to borrow money for a 3 month vacation before starting working"", which the answer is ""Well, not exactly"".  That's not from a credit perspective, just from a living within your means perspective.  If you have a firm job that will easily pay off the vacation, it's probably not a bad thing, but definitely a certain number of people will take this and end up in 'spending bad habits' that last their life.  Be aware of that, and if you're just loaning yourself money from the future, make sure you understand the terms of that loan... and are certain you can pay it off." "Credit is like dignity - it takes a long time to build but a short time to lose. Your credit history is mostly made up of your prior activity for several years. There's no ""quick fix"" to raise your credit score in a short period.  Paying your student loans on time will help, but it will take quite some time for that activity to make a big difference in your credit. If you can't get approved for a car loan of $15k, then perhaps it's time to either reset your expectations or save up enough to make a large down payment on a more expensive car.  Instead of prepaying your student loans that are not due, save up that money for a down payment. You can get an incredibly reliable car for much less than $15,000. Also, make sure that you will be able to afford the car payment when your student loans do become due (based on your current salary, not some hypothetical future salary)  Another plan: drive your car for another year, pay off your student loans in that time, and then you might have enough credit history to get a better loan." While, from a money-saving standpoint, the obviously-right course of action is to make only the minimum payment on the 0% loan, there are potentially legal reasons to try to pay off a car loan early. With a mortgage, you are the legal owner of the property and any action by the lender beyond imposing fees (e.g. foreclosure) requires going through the proper legal channels. On the other hand, in most jurisdictions, you are not the legal owner of a car purchased on a loan, and a missed or even lost payment can result in repossession without the lender even having to go to court. So from a risk-aversion standpoint, there's something to be said for getting rid of car loans as soon as you can. Sometimes I think it helps to think of the scenario in reverse. If you had a completely paid off car, would you take out a title loan (even at 0%) for a few months to put the cash in a low-interest savings account? For me, I think the risk of losing the car due to non-payment outweighs the tens of dollars I might earn. The main benefit of paying off the loan early is that it's not on your mind, you don't have to worry about missing a payment and incurring the full interest due at that point. Your loan may not be set up that way, but most 0% interest loans are set up so that there is interest that's accruing, but you don't pay it so long as all your payments are on time, oftentimes they're structured so that one late payment causes all of that deferred interest to be due.  If you put the money in the bank you'd make a small amount of interest and also not have to worry about funds availability for your car payment. If you use the money for some other purpose, you're at greater risk of something going wrong in the next 21 months that causes you to miss a payment and being hit with a lot of interest (if applicable to your loan).  If you already have an emergency fund (at least 3-6 months of expenses) then I would pay the loan off now so you don't have to think about it.  If you don't have an emergency fund, then I'd bank the money and keep making payments, and pay it off entirely when you have funds in excess of your emergency fund to do so. Personally, I don't think that the interest from the car loan is worth the credit history you're building through it. There are other ways to build credit that don't require you to pay interest, like the credit card you mentioned (so long as you keep paying off the balance). So I'd go that route: ditch the auto loan and replace it with a line of consumer credit. Just be careful not to overspend because the card will likely have a higher interest rate than your loan. "It makes no sense to spend money unnecessarily, just for the purpose of improving your credit score.  You have to stop and ask yourself the question ""Why do I need a good credit score?""  Most of the time, the answer will be ""so I can get a lower interest rate on (ABC loan) in the future.""  However, if you spend hundreds or even thousands of dollars in the present, just so that you can save a few points on a loan, you're not going to come out ahead. The car question should be considered strictly in the context of transportation expenses:  ""It cost me $X to get around last year using Lyft. If instead I owned a car, it would have cost me $Y for gas, insurance, depreciation, parking, etc.""  If you come out ahead and Y < X, then buy the car.  Don't jump into an expensive vehicle (which is never a good investment) or get trapped into an expensive lease which will costs you many times more than the depreciation value of a decent used car, just so that you can save a few points on a mortgage. Your best option moving forward would be to pay off your student loans first, getting rid of that interest expense.  Place the remainder in savings, then start to look at a budget.  Setting aside a 20% down payment on a home is considered the minimum to many people, and if that is out of reach you might need to consider other neighborhoods (less than 400K!).  If you're still concerned about your credit score, a good way to build that up (once you have a budget and spending under control) is to get a credit card with no annual fees.  Start putting all of your expenses on the credit card (groceries, etc), and paying off the balance IN FULL every month.  By spending only what you need to within a reasonable budget, and making payments on time and in full, your credit rating will begin to gradually improve.  If you have a difficult time tracking your expenses or sticking to a budget, then there is potential for danger here, as credit cards are notorious for high interest and penalties.  But by keeping it under control and putting the rest toward savings, you can begin to build wealth and put yourself in a much better financial position moving into the future." I don't agree with others regarding paying off debt ASAP. You only have auto loan and auto loans are actually good for your credit score. With a mere $6k balance, it is not like you are going to have a problem paying off the loan. Not only that you will build your credit score and this will come in handy when you are purchasing a home.  With the Federal Reserve setting the interest rate at 0% until 2015, I can't understand why people would pay off anything ASAP. As long as you don't have revolving credit card balances, you are in the clear. I don't know your salary nor how big your porfolio is but I would save 5 months expense in cash and dump the rest in precious metals. Holding cash is the worst thing you could be doing (unless you predict a deflation).  You said you already have 40% in precious metals. You are already way ahead of other 95% of  Americans by protecting your purchasing power. Follow your gut. The stormg is coming and it's not going to get any better.