Build credit or pay off loan?
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I have a car loan with 0% APR. I have no other debts, and no credit cards. I have enough money to pay the car loan off. What’s better – pay off the loan and be debt-free or continue payment to build credit?
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Usually, if you have the funds than it pays to pay-off loans. However, since you’re not paying interest on the loan you benefit nothing by paying it off (assuming you’re financially responsible and won’t blow off that money).
Instead – invest the cash in something that pays interest, and continue to make timely payments on the loan. This should build you credit, which can further save you money on insurance rates, future loan terms etc. You will need to make at least 18-24 monthly payments for e decent credit score.
I would also consider a credit card. Credit cards are a very cheap way to establish credit. If you pay the balance in full you never pay for interest, and so it cost you nothing to build good credit.
Use the card for regular purchases like groceries or gas, wait for the statement, and pay the balance in full every month. This will build good payment history for you and will boost your score.
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