Should I pay off my car loan within the year?
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. Something I'd like to plant firmly into your mind - If you're able to save up enough money to buy the things you want outright, credit will be of little use to you. Many people find once they've accumulated very good credit scores by use of good financial habits, that they rarely end up using credit, and get little out of having a 'great' credit score compared to an 'average' credit score. Of course, a lot of that would depend on your financial situation, but it's something to keep in mind. As stated by others, and documented widely online, you don't need to make payments on a loan or carry a card balance to build your credit history. Check your credit on a popular site, such as Credit Karma (No affiliation). There, you'll see a detailed breakdown of the different areas of your credit profile that matter; things like:  The best thing I could recommend is get a credit line or credit card, and use it responsibly. Carrying a balance will waste money on interest, much like the car payment. Just having it and not over-using it (Or not using it at all) will 'build' your credit history. Of course, some institutions may close your account after X number of years of inactivity. With this in mind, I'd say it's safe to pay off the car loan. Read your agreement and make sure there aren't early termination / early payment fees for this. Edit: There have been notes in the comments section's of question/answer's here about concerns with getting apartment. My two cents here: Most apartments I've seen check your credit for negative marks.  Having no credit history, and thus never missing a payment or having a judgement made against you, will likely be enough to get you into most normal-quality apartments, assuming the rest of your application / profile is in order, like:  - Good references, if asked for them  - At least 2.5x rent payment in gross income etc, things like that. If they really think you're a risk, they may ask for a larger deposit (Though I'm sure in some areas there may be restrictions on whether they can do this, or how much they can do it) and still let you rent there. Contrary to popular belief, you can build your credit (if that is important to you) without paying a penny in interest.  This is done through the responsible use of credit cards, paying the bill in full each month without accruing any interest charges. If I were you, I would pay off the loan today, if possible.  After that, if you decide you need to build up your credit, apply for a credit card.  If you have difficulty with that, you can get a small secured credit card or retail store credit card until you have enough history to get a regular credit card. Generally, banks will report your loan to at least one (if not all three) credit bureaus - although that is not required by law. The interest you're paying, in addition to your insurance isn't justifiable for building credit. I would recommend paying the car off and then perhaps applying for a secure credit card if you are worried about being rejected. Of course, since you have very little credit, applying for an unsecured card and getting rejected won't hurt you in the long run. If you are rejected, you can always go for a secured credit card the second time.  As I mentioned in my comments, it's better to show 6 months of on-time payments than to have no payment history at all. So if your goal is to secure an apartment near campus, I'm sure you're already a step ahead of the other students. Your plan isn't bad, but it probably isn't worth the cost for the small amount of credit building it will achieve. If you do decide to continue with it though, you'll save in interest if you make the big payment now rather than in 6 months. In other words, you can take the minimum payment, multiply it by 5, subtract that amount from the total you owe and pay the difference immediately. This way you'll still get the 6 months of reporting to the credit bureaus, but you'll pay less interest since you'll have less principle each month. I would recommend applying for the credit card right now. I believe you'll probably get approved now. If you do, then pay off the car loan without thinking about it. (If you don't get approved, think about it, then probably still pay it off.) Regarding the full coverage insurance, even after the loan is paid off and you aren't required to have it, you may still want to keep it. Even if you're the best driver on earth, if someone hits you and doesn't have insurance, or they have insurance and drive off, or a deer runs in front of you, etc, you'll lose your car and won't be reimbursed. Also, as Russell pointed out in the comments below, without collision coverage your insurance company has no incentive to work on your behalf when someone else hits you, so even if it's not your fault you may still not get reimbursed. So, I wouldn't pass on the full coverage unless your car isn't worth very much or you can stomach losing it if something happens. Good luck, and congrats on being able to pay for a car in full at 19 years old. Typically the power of capitalized interest would work in your favor and you could carry the loan paying it down while investing the original sum which would earn interest. BUT you aren't going to get any sort of return to compare with 15% so pay off that loan immediately. Also contrary to popular belief (and reiterated here) paying off incurred balance on your credit card every month is responsible use of credit but it will not do much for your credit score. The score ultimately means your ability to pay your bills and most importantly your willingness to pay interest, i.e. revolving the borrowed money. At least in the consumer market where the product they want you to buy is paying monthly interest charges. "Credit reports have line items that, if all is well, say ""paid as agreed."" A car loan almost certainly gets reported. In your case it probably says the happy ""paid as agreed.""  It will continue to say that if you pay it off in full. You can get the happy ""paid as agreed"" from a credit card too.  You can get it by paying the balance by the due date every month, or paying the mininum, or anything in between, on time. But you'll blow less money in interest if you pay each bill in full each month. You don't have to carry a balance. In the US you can get a free credit report once a year from each of the three credit bureaus. Here's the way to do that with minimal upsell/cross-sell hassles. https://www.annualcreditreport.com/  In your situation you'd probably be smart to ask for a credit report every four months (from each bureau in turn) so you can see how things are going.  They don't give you your FICO score for free, but you don't really care about that until you're going for a big loan, like for a condo. It might be good to take a look at one of those free credit reports real soon, as you prepare to close out your car loan. If you need other loans, consider working with a credit union. They sometimes offer better interest rates, and they often are diligent about making credit bureau reports for their good customers; they help you build credit. You mentioned wanting to cut back on insurance coverage. It's a worthy goal, but it's generally called ""self-insuring"" in the business.  If you cancel your collision coverage and then wreck your car, you absorb the cost of replacing it. So think about your personal ability to handle that kind of risk." Pay it off....I've only ever paid interest on mortgages to buy the houses I've lived in (I paid both mortgages of years ahead of schedule) & as a result my credit rating's way above average, I use credit cards for everything, pay 'em off in full every month unless I'm paid not to (currently have around 8,000 sitting interest free while the cash earns 6% elsewhere). Life's sweet if you understand the system. Hell if you don't. Keep saving... First, don't owe (much) money on a car that's out of warranty.  If you have an engine blow up and repairs will cost the lion's share of the car's bluebook value, the entire car loan immediately comes due because the collateral is now worthless.  This puts you in a very miserable situation because you must pay off the car suddenly while also securing other transportation!  Second, watch for possible early-payment penalties.  They are srill lokely cheaper than paying interest, but run the numbers.  Their purpose is to repay the lender the amount of money they already paid out to the dealer in sales commission or kickback for referring the loan.  The positive effects you want for your credit report only require an open loan; owing more money doesn't help, it hurts.  However, interest is proportional to principal owed, so a $10,000 car loan is 10 times the interest cost of a $1000 car loan.  That means paying most of it off early can fulfill your purpose. As the car is nearer payoff, you can reduce costs further (assuming you cna handle the hit) by increasing the deductible on collision and comprehensive (fire and theft) auto insurance.  It's not just you paying more co-pay, it also means the insurance company doesn't have to deal with smaller claims at all, e.g. Nodody with a $1000 deductivle files a claim on an $800 repair.  If the amount you owe is small compared to its bluebook value, and within $1000-2000 of paid off, the lender may be OK with you dropping collision and comprehensive coverage altogether (assuming you are).  All of this adds up to paying most of it off, but not all, may be the way to go. You could also talk to your lender about paying say, 3/4 of it off, and refinancing the rest as a 12-month deal.
"As a car guy, I wouldn't spend 27 large on anything that wasn't ""special"" - you'll be looking at for at least the duration of the loan and for me it'll better be very special lest I get bored with it during that time. But that's just me. If you want a transport appliance - spend around $5k-$7k on a decent used vehicle, pay it off within a couple of years or less and keep throwing money at your downpayment. Now if you have any student loan debt, buy a $3k car, learn how to fix it if necessary and pay off the millstone, err, student loan ASAP." "It all depends on your loan contract, and the way most are written, the 10 day thing will not help.  However, assuming that the contract is written in such a way to allow this, the difference will be negligible. By ""saving money"" I assume you mean the amount of interest paid.   There is really two ways of doing this.  If you carry the loan to term paying the indicated amount on the due date you will pay $6,140 in interest.  An increase of over 33% to the cost of the car.  Yikes, that is a lot of money.   You should seek to minimize your interest expense.   One way to do this is to reduce your rate.  Applying for a new loan that is at a more reasonable 6% and continuing to pay the ~285 per month will reduce the term to 59 months and only cost you $2,245 in interest.  A large savings.   Even better is to work a second job and earn an extra 1,000 per month.  Then bundle it with your 285 payment and shoot that at the loan.  This way you will only pay $965 in interest, and have it paid off in a year.  Once you do that, you can stick $300/month or so in a savings account or other investment and pay for every other car in cash.  Making choices like these leads to building wealth.  So the question becomes do you want to spend the rest of your life on the hamster wheel of car payments, or do you want to spend one year in pain so you make smart choices in the future?  The choice is yours." "Making extra principal payments will reduce the term of your loan. I wouldn't sign up for a biweekly schedule, just do it yourself so you have more flexibility. A simple spreadsheet will allow you to play ""What if?"" and make it clear that extra principal payments are most effective early in the term of the loan. My wife and I paid off our home in less than 10 years with this approach. Some will say that the opportunity costs of not using that money for something else outweighs the gains. I would say that not having a mortgage has a positive impact on your cash flow and your assets (you own the home), which combine to create more opportunity, not less. That being said, It should be obvious that paying off higher interest debt first is the priority, (Paying off a zero percent interest car loan early is just foolish)" "Let me give you some advice from someone who has experience at both ends - had student loan issues myself and parents ran financial aid department at local university. Quick story of my student loan.  I graduated in debt and could not pay at first due to having kids way too early.  I deferred.  Schools will have rules for deference.  There are also federal guidelines - lets not get specific on this though since these change every year it seems.   So basically there is an initial deferment period in which any student can request for the repayments to be deferred and it is granted.  Then there is an extended deferment.  Here someone has to OK it.  This is really rather arbitrary and up to the school/lender.  My school decided to not extend mine after I filled out a mound of paperwork and showed that even without paying I had basically $200 a month for the family to live off past housing/fixed expenses. Eventually they had to cave, because I had no money so they gave me an extended deferment.  After the 5 years I started paying.  Since my school had a very complex way to pay, I decided to give them 6 months at a time.  You would think they would love that right?  (On the check it was clearly stated what months I was paying for to show that I was not prepaying the loan off) Well I was in collections 4 months later.  Their billing messed up, set me up for prepayment.  They then played dumb and acted like I didn't but I had a picture of the check and their bank's stamp on the back... They couldn't get my loan out of collections - even though they messed up.  This is probably some lower level employee trying to cover their mistake.  So this office tells creditors to leave me alone but I also CANNOT pay my loan because the credit collection agency has slapped a 5k fee on the 7k loan.  So my loan spent 5 years (kid you not) like this.  It was interest free since the employee stopped the loan processing. Point being is that if you don't pay the lender will either put your loan into deferment automatically or go after you.  MOST (not all) schools will opt for deferment, which I believe is 2 years at most places.  Then after that you have the optional deferment.  So if you keep not paying they might throw you into that bucket.   However if you stop paying and you never communicate with them the chances of you getting the optional deferment are almost none - unless school doesn't know where you live.  Basically if you don't respond to their mail/emails you get swept into their credit collection process.  So just filling out the deferment stuff when you get it - even if they deny it - could buy you up to 10 years - kid you not.   Now once you go into the collection process... anything is game.  As long as you don't need a home/car loan you can play this game.  What the collection agency does depends on size of loan and the rules.  If you are at a ""major"" university the rules are usually more lax, but if you are at the smaller schools, especially the advertised trade/online schools boom - better watch out.  Wages will be garnished very soon.  Expect to go to court, might have to hire an attorney because some corrupt lenders start smacking on fees - think of the 5k mine smacked on me.   So the moral of the story is you will pay it off.  If you act nice, fill out paperwork, talk to school, and so on you can probably push this off quite a few years.  But you are still paying and you will pay interest on everything.  So factor in that to the equation.  I had a 2.3% loan but they are much higher now.   Defaulting isn't always a bad thing.  If you don't have the money then you don't have it.  And using credit cards to help is not the thing to do.  But you need to try to work with the school so you don't incur penalties/fees and so that your job doesn't have creditors calling them.   My story ended year 4 that my loan was in collection.  A higher up was reviewing my case and called me.  Told her the story and emailed her a picture of their cashed check.  She was completely embarrassed when she was trying to work out a plan for me and I am like - how about I come down tomorrow with the 7k.  But even though lender admitted fault this took 20+ calls to agencies to clear up my credit so I could buy a house.   So your goal should be:" Paying off your loan in full will most likely not help your credit score, and could potentially even hurt it. Because car loans are installment loans (and thus differ from consumer credit), lenders really only like seeing that you responsibly pay off your loans on time. They don't really care if you pay it off early--lenders like seeing open lines of credit as long as you manage them well. The hard inquiry will simply lower your credit score a few points for up to two years. So, from a credit score perspective, you're really not going to help yourself in this scenario (although it's not like you're going to be plummeting yourself either). There is a reason - your credit score. If you ever take out a mortgage, you might pay dearly for your behavior. The bank where you have the credit card reports the amount on the bill to the credit rating agencies. If you pay before the bill date, they will always report zero. You should wait at least till the day after the billing cycle ends, and then pay off (you don't need to have the paper bill in your hands - you can see online when the cycle closed). Depending on your other financial behavior, this will have between zero and significant effect, on the percentages you get offered for car loans, mortgages, etc. "Yes, a HELOC is great for that. I just had my roof done last month (~$15K, ""ugh"") and pretty much every major contractor in my area had a 0% same-as-cash for at least 12 months. So that helps - any balance that I don't bank by 11/15/2015 will be on the HELOC." I'd be tempted to pay off the 35k in student loans immediately, but if you have to owe money, it's hard to beat zero percent. So I don't think I would pay it all off. Maybe cut it in half to make it a more comfortable payment. Currently, you are looking at $6K a year to pay them off, which is about 20% of your income. Cut that in half and you will sleep better! Definitely pay off the medical and credit cards. You're probably paying 20% on that. Clean it up. If you need a car, buy yourself a car. You have no savings, so I would put the rest in some kind of money market savings account. You are at an age where many people go through frequent changes. Maybe you get your own place, and you'll need to furnish it. Maybe you go back to school. Maybe you get married or have kids. Maybe you take a year off and backpack through Europe or Asia. You have a nice little windfall that puts you in a nice position to enjoy being young, so I would not lock it up into a 401k or other long term situation.