Should I refinance my car?

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paparoach429
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Should I refinance my car?

Postby paparoach429 » Tue Mar 10, 2015 2:57 am

I don't know anybody who has refinanced a car that is/was in a similar situation as me. I bought my car when I was 20, with no cosigner and was given a 8.9% loan. I still owe 48 months left on the loan but my credit has risen a decent amount. I don't remember what it was when I bought my car, probably somewhere around 690. Its now at 760 according to creditkarma and 750 according to Citibank. Income has gotten better and inquiries have gone way down. If I do refinance whats the best way to go about it without adding too many inquiries? Just shoot out one or two inquiries to like Citibank and Bank of America and just go with the better rate? Also what sort of fees are associated with refinancing?


Brad Bishop
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Postby Brad Bishop » Tue Mar 10, 2015 7:29 am

You say, "When you were 20," like it was 5 years ago but then you say you still owe 4 years on the car. I'm guessing that you have at least a 7 year note.

My recommendation: Talk to your bank about refinancing it but I'm guessing that you're upside down in it and they likely won't do it. Still worth a call.

Either way, pay it off ASAP. You don't want to be caught with an old, unreliable car that can't get you to work but you still own 3 years on it.

For the future, I recommend you don't get into a car if it's going to take you more than 4 years to pay it off. Look for a different car. 3 years is even better.

I don't know that they still teach this in school but:
Time Value of Money formula:
http://en.wikipedia.org/wiki/Time_value_of_money

Not trying to bust your chops here but I think a lot of people buy based on "monthly payment" with no thought at all to the longevity of the vehicle vs the length of the loan or the interest paid or anything of the sort.

thom02099
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Postby thom02099 » Tue Mar 10, 2015 10:33 am

paparoach429 wrote:I don't know anybody who has refinanced a car that is/was in a similar situation as me. I bought my car when I was 20, with no cosigner and was given a 8.9% loan. I still owe 48 months left on the loan but my credit has risen a decent amount. I don't remember what it was when I bought my car, probably somewhere around 690. Its now at 760 according to creditkarma and 750 according to Citibank. Income has gotten better and inquiries have gone way down. If I do refinance whats the best way to go about it without adding too many inquiries? Just shoot out one or two inquiries to like Citibank and Bank of America and just go with the better rate? Also what sort of fees are associated with refinancing?


What is it that you want to accomplish with the refi? Shorten the length of the loan? Lower payments?

What were the original terms of the loan, besides 8.9%? (Car/cost of said car/amount financed/length of the loan).

As previously stated, you may be upside down on this. Talk to your current lender about what you can do, depending on what you want to accomplish. You may be able to keep the terms to the current 48months owed, but lower your APR. Your CreditKarma score is meaningless, since it's a VantageScore 3.0 (says so on the Dashboard - few lenders use it), the Citi score is Equifax FICO, so that is a better indicator, but just one of the three. Find out what your current lender used and what that score is. I've done refi's in the past to lower payments over the same term length as that of the time of the refi as my scores have increased, but I've also always used my credit union, since rates are far better than anything offered commercially, and there were no fees at all for the refi.
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paparoach429
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Postby paparoach429 » Wed Mar 11, 2015 1:13 am

It was a 75 month term, and no I'm not upside down on it but thanks for assuming that. It only has 23,000 miles on it so I'm sure I wont be caught with "an old, unreliable car" in the next year. I did take into consideration of the length of the loan and interest paid. Not only did I want, but also needed a new/newer car. My old one had 199k on it before I got rid of it, it wasn't going to last much longer. And I don't think many people go for 3 year loans. Even at 0% and an average car of 25k out the door is $694 a month. That's more than most people are willing to pay, including me.

What I want to accomplish with the refinance is strictly to shorten the loan. If they lower my interest and I make the same payments I obviously will pay it off quicker. I don't mind actually paying more per month, I just want to shorten my loan but if I can get a lower interest at the same time then why not...

takeshi
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Postby takeshi » Wed Mar 11, 2015 9:11 am

Are you unable to make principal only payments on top of the required payments? You can shorten the loan (and pay less interest) that way as well. If you can reach a point where you can pay off the loan early then ask for a payoff quote at that time.

paparoach429 wrote:And I don't think many people go for 3 year loans. Even at 0% and an average car of 25k out the door is $694 a month. That's more than most people are willing to pay, including me.

Average has gone up to 66 months according to Experian but average doesn't matter. Each needs to make financial decisions that are sound for the individual.



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