Either way works. Paying off a small installment loan will barely move your score or your approval. Paying off installment debt, like an auto loan or personal loan, generally has almost no effect on your credit score in either direction. Revolving credit card debt behaves differently, where paydowns can move the needle a lot. So do not expect a score bump from retiring the car loan, and do not fear a hit either. On qualifying, your situation is even simpler. With a few thousand dollars left and only a handful of months of payments, the loan pays itself off right around closing anyway, so it is not really a factor in your debt-to-income ratio. And with no other debt and healthy cash in the bank, paying it early does not strain your liquidity. Some people would rather clear the last small balance and be done. Nothing wrong with that. The one requirement: tell your loan officer before you make any large payment or move money between accounts, because during a live transaction they need to track your funds cleanly. Confirm the timing with them, then do whichever feels best to you.