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10-27-2007, 02:26 PM
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Location: West Michigan
638 posts, read 1,404,669 times
Reputation: 484
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Refinancing Auto Loans?
I bought a new car last year with the interest at 14%, which was financed through Toyota (yea my credit wasn't great, but was decent enough to qualify at the time). I know that 14% is quite high as compared to those with better credit getting better rates, but I wanted to know if it would be a good idea to refinance my loan after a year (which for me will be next month). I have been getting offers in the mail from one of my credit card companies regarding refinancing my auto loan, but I pretty much ignored them as I wanted to wait after a year to look into that.
So, does it make sense to refinance an auto loan after a year of on-time payments? I would like to get a better interest rate and a lower monthly payment too. Then perhaps I can continue the same payment pattern in order to chip away at the interest by paying extra each month. Any thoughts would be appreciated.
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10-27-2007, 04:51 PM
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Location: Cary, NC
2,405 posts, read 5,904,586 times
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Are there fees associated with refinancing? What would the new terms be (how long is the new loan for?) It would make a world of difference.
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10-27-2007, 05:00 PM
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Location: in drifts of snow wherever you go
2,524 posts
Reputation: 692
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Quote:
Originally Posted by AVTechMan
I bought a new car last year with the interest at 14%, which was financed through Toyota (yea my credit wasn't great, but was decent enough to qualify at the time). I know that 14% is quite high as compared to those with better credit getting better rates, but I wanted to know if it would be a good idea to refinance my loan after a year (which for me will be next month). I have been getting offers in the mail from one of my credit card companies regarding refinancing my auto loan, but I pretty much ignored them as I wanted to wait after a year to look into that.
So, does it make sense to refinance an auto loan after a year of on-time payments? I would like to get a better interest rate and a lower monthly payment too. Then perhaps I can continue the same payment pattern in order to chip away at the interest by paying extra each month. Any thoughts would be appreciated.
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Have you tried calling another bank to see if they could refinance the loan?
Greenie
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10-27-2007, 11:01 PM
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Location: West Michigan
638 posts, read 1,404,669 times
Reputation: 484
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I'm sure it can be refinanced, but I haven't called any other banks yet. I don't think there are any fees with refinancing, as you aren't taking on new debt, just changing to a different lender. Probably sometime next month I will call and check it out.
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10-28-2007, 03:31 PM
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73 posts, read 276,294 times
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Umm...refinancing almost always incurs fees.
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10-28-2007, 09:34 PM
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1,353 posts, read 2,690,576 times
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This same thing happened to me, although it wasn't a Toyota  and it's been about 3 years. I got a ridiculous interest rate because of an incorrect tax lien on my credit report, which was subsequently removed but the didn't fix my FICO score (said I had to build back up my score  ). Anyway, after the first year I called Wells Fargo to try and re-finance into a lower interest rate since I had been making my payments on time. They told me that they would not be able to refinance me because what I owed, exceeded what the vehicle was worth. I was p*ssed!
Anyway, here I am 4 years later, was able to buy a home and still stuck with this vehicle and ridiculously high interest rate. I called them up and told them that they could come get it, I didn't want it anymore. They then suggested that I go into a local branch and speak with a loan officer about trying to work out and possibly re-finance.
IMO that's a load of bologne because the vehicle has depreciated even more. So why would they refinance now, 4 years later, when they wouldn't do it 12 months after the purchase?
I'm relucant to even waste my time because that'll just show up as a recent inquiry on my credit report which will in turn take away points from my score. Any suggestions?
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10-29-2007, 05:02 AM
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Location: NE Florida
17,103 posts, read 17,689,130 times
Reputation: 42993
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Actually refinancing a car is probably the only refinancing that would not incur a fee.
You go to the bank or credit union apply and they send a payoff check to in your case Toyota.
ayannaaaliyah brings up a very good point there is a pretty good chance you are what they call "upside down" on your current loan. Unless you put a large down payment.
It is usually not until the 2nd or 3rd year till you are normally "in equity"
The first thing I would do is check the current "retail value" of your car. Banks/credit unions usually will not lend more than this amount. If you are upside down and have the cash to cover the difference this would be an option.
One thing you can do is find out the finance charge your being charged each month and see if you can add that to your loan principle each month. This would help pay the loan off faster and chip away at the difference.
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10-29-2007, 05:27 AM
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1,395 posts, read 2,178,523 times
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I refinanced my auto loan through my credit union and the interest rate dropped from 12 to 4.7%. I paid off the loan in 2 years instead of 5. There were no refinancing fees involved.
I would highly recommend refinancing to save on the finance charges.
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10-29-2007, 07:20 AM
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Location: West Michigan
638 posts, read 1,404,669 times
Reputation: 484
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Quote:
Originally Posted by Karla with a K
Actually refinancing a car is probably the only refinancing that would not incur a fee.
You go to the bank or credit union apply and they send a payoff check to in your case Toyota.
ayannaaaliyah brings up a very good point there is a pretty good chance you are what they call "upside down" on your current loan. Unless you put a large down payment.
It is usually not until the 2nd or 3rd year till you are normally "in equity"
The first thing I would do is check the current "retail value" of your car. Banks/credit unions usually will not lend more than this amount. If you are upside down and have the cash to cover the difference this would be an option.
One thing you can do is find out the finance charge your being charged each month and see if you can add that to your loan principle each month. This would help pay the loan off faster and chip away at the difference.
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Good points. In my case I have a Prius, and being a hybrid so far from what I have seen the value for these cars are still pretty good because of the current gas prices. I will check on refinancing with either my local bank or credit union and see if its worth the time. Anything lower than the current 14% I am paying now will be great, as it will lower my payments and I can work on paying the loan off faster.
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10-29-2007, 07:52 AM
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Location: NE Florida
17,103 posts, read 17,689,130 times
Reputation: 42993
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AVTechMan
You are probably in a good situation.
Checking with a bank or credit union you have a relationship is always a good move. You can sit down and explain the situation and show them the 1 year of payments. You can also do automatic payments and that sometimes can get you an even better rate. We were able to get our rate lowered 6% to 5.75% when we financed our car through our credit union just by having auto payments.
Also a 2006 or 2007 model should still qualify for the new car rates.
I would steer away from the credit card offers, I have a feeling I know which one is offering to do the refi.
Good luck let us know how it works out.
karla
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