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Will paying off a car loan early improve my credit?
I just got a sum of money from a life insurance payout, and I want to settle my bills. Will paying off my car loan early improve or hurt my credit?
Matthew Macgugan · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Congratulations on the incoming money! In some circumstances, paying off a loan early may have a negative impact on your credit score.
If you make any major change to your credit history, like settling an old debt or closing an account, your score will change by a few points. Keeping open accounts in good standing for many years has more positive impact on your credit score.
It may be smarter to keep paying your loan over time to improve your score. The only case where this may not be the best plan is if you have
high interest
on your loan. Paying it off sooner will prevent you from paying this interest over time and save you money in the long run, so long as you don’t have any prepayemnt penalties
.If you do pay off your loan early, not only will you (potentially) save on interest, but you can also save on car insurance. Lenders require you to carry full coverage car insurance on a financed vehicle, and once you pay it off you have control over the type of coverage you carry.
The best way to save on car insurance is by using the number-one-rated car insurance app,
Jerry
. Jerry compares personalized quotes from over 50 of the nation’s leading providers, including Nationwide, Allstate, and Travelers, so you can get the coverage you need at a great price. The average Jerry driver saves $879 a year on car insurance!Good luck.
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- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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