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Does settling a loan early affect my credit rating?

by Impossifool 04 March 2010 |

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I've had a really good loan from AA at 6% (I was amazed when they accepted me at that advertised rate) since 2007 and I have 10 months left on it. I received some back pay this month and there's more than enough to cover the loan. Considering the settlement figure is about the same as what I'll pay if I finish off the monthly payments, I'm trying to figure out if I should continue paying the loan and invest the lump sum, or pay off the loan and save some portion of what I'm currently paying out each month.

I'll be grateful for for any (good lol) advice,

Impossifool.

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212

SoftwareBear posted
There is obviously some penalty involved in repaying early, otherwise this just should not be the case.
Somethings people will need to know to give better answer ... how close is the difference ... how big is the amount left to repay ... what tax band are you in ?
Posted on 04 March 2010 | Love 1 love Report
212

SoftwareBear posted
As to whether it'll hurt your credit rating ... I would doubt it very much ... it might improve it ... but then doing that might make you less interesting for obtaining more credit ... as you're likely to pay it off quickly rather than line their pockets with interest payments.
Posted on 04 March 2010 | Love 1 love Report
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Impossifool posted
Thank you SoftwareBear.
The difference amounts to a couple of hundred pounds.
I'm not sure what tax band I'm in, I think it's the 20% band, but it will change soon as I've changed role and will now be getting a lease car through the company.
Posted on 04 March 2010 | Love 0 loves Report
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SoftwareBear posted
I guess it depends on how much £200 compares to the outstanding loan amount ... it'll be hard to get £200 interest in 10 months unless it's a large amount.
Probably not able to open an ISA to cover that amount in the time you have to get £200 ... other higher interest returns will require locking it away or risk loosing it ... and won't be tax free returns either ...
Posted on 04 March 2010 | Love 1 love Report
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MikeGG1 posted
If you supply the figures, we might be able to help.
From what you say, i will assume that your top tax rate is 20% for this tax year and 40% for the next tax year.
Do you pay interest on a credit card account? If so, that should be your first priority.
Mike
Posted on 04 March 2010 | Love 0 loves Report
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bazintemple1 posted
Same thing happend with me as i borrowed a certain amount from same day loans and i repayed it earlier, though i have to pay same extra charges as it was pretty much less as compaired to what i have to pay if i complete the whole loan tenure.
So in all I should say that i am a lucky one maybe one among many who says that he is satisfyed.
Posted on 12 March 2010 | Love 0 loves Report

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