flake towards car loan?
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| Fri, 09-09-2005 - 12:41pm |
Hi everyone. I recently was able to refinance my car loan to get extra money (about 300 dollars) for some repairs i needed on the car. at that time I was able to get my new loan in my own name (I am 22 and always needed a co-signer before this time.) So noone else's name is on it but me. I want to flake towards my car loan as soon as I can, because I only have 10 payments left, however I was told that once I have a car loan in my name I need to make payments for 12 months and if I do that without a problem I should never have a problem with needing a cosigner again. Is that just a bunch of crap? Someone I work with told me this. I'm afraid that if I work hard and pay it off early that they might look at that negatively for some reason (can't commit to long term payment or something weird) and then ask me to get a cosigner next time i want a car.
What do you think?

I've never heard of a 12-month rule.
All my best,
Danni
I think I understand what your friend is saying. No matter how good you are with your money and credit, if you don't have an established, documented credit history, no one will want to loan you money. Silly, I know. But sadly true.
But I wouldn't let that deter you from paying off your car loan! What I would do instead, is get a credit card. Any old credit card will do. Then, set up a utility bill for auto pay on that credit card. When the bill comes each month, pay it just as you would pay your utility bill--in full--do NOT carry a balance from one month to the next (no need to pay interest!). If you think there's a risk that you will use the credit card just because you have it, you can cut it up. You won't need it again once you're set up on auto-pay for your utility bill.
This will give you a regular, established credit record that will show up on your credit report and show you as paying reliably and regularly. And you can still pay your auto loan off early.
Oh, and on the extra payments issue--I always just write in the "For" line of the check "Extra amout to be applied to principal." That will ensure the extra is taken off your principal and not just applied to the next month's payment. If you're paying online, however, you probably will have to call them.
Take care and let us know how it goes.
Blessings,
Heather
ITA with Danni. It seems to me that if you paid the car loan off early it would be a better sign of you being responsible.
I also agree with calling the bank if you are going to make extra payments. I made a couple of payments to principal on my van. One was enough to trigger an automatic principal payment (I sent a note in with the payment). The other was only a little less than the regular payment so they counted it as a regular payment and took out the interest and said I owed the rest of the payment for my next regular payment (I had also included a note that it was a principal payment). When I called to find out why, the rep told me that if I wanted to make principal payments I needed to send the payment with a note to a completely different address, so I would definitely call and find where to send my payment.
BTW, they did reverse the interest and give me credit for the principal.
Good luck,
Kellie