 TITLE: Does Paying Off a Car Loan Early Hurt Your Credit? CONTENT: When Is It a Good Idea to Pay Off Your Car Loan Early?\n------------------------------------------------------\nThere are some situations when paying off your car loan early may be a smart move:\n*   **If you have a high interest car loan**: If you have a 60-, 72- or even 84-month auto loan, you'll be paying a lot of interest over the life of your loan. Paying off the loan early can reduce the total interest you pay. Before doing so, make sure your lender doesn't charge a prepayment penalty for paying off the loan early. (If you have a _precomputed interest_ loan, the total amount of interest you'll pay was calculated and fixed at the start of the loan, so even if you pay off the loan early, you still have to pay that precomputed interest.)Refinancing a high interest auto loan for one with a lower interest rate is an alternative to paying it off early. If your credit score has improved or interest rates have dropped substantially since you bought the car, refinancing can reduce your payments, and your credit score can still benefit if you make those payments on time.\n*   **When you need to improve your debt-to-income ratio**: Some lenders consider your debt-to-income (DTI) ratio—the total amount you owe every month compared with the total amount you earn—when deciding whether to offer you credit. In general, lenders like to see a DTI of 43% or less, but many lenders prefer ratios below 31%. (Learn more about calculating your debt-to-income ratio.) If you're planning to apply for a home mortgage in the near future, but your DTI is higher than lenders like to see, paying off your car loan early could boost your chances of qualifying for a mortgage.\n*   **When you have additional open accounts**: Do you have lots of other credit accounts and a good credit mix (such as a mortgage, a student loan and several credit cards)? If you have a long credit history with diverse types of credit, paying off your car loan early should only cause a temporary dip in your credit score. END