Auto Refinance through WF to get cash out of $5,000 for a Secured Personal Loan or Line of Credit

[Anonymous]

Hey guys! This is my first post on this or any forum and I wanted to get some input on a route that I am contemplating on taking in my credit building journey. Let me give you guys some background info. I started building my credit when I was 18, I am now 21, working at chick-fil-a with a $300 secured credit card through Wells Fargo whom I have banked with since I was 15(I also worked for Wells Fargo as a teller for a year before moving into my current position) when I would clean houses every summer with my mom. Since then I have opened 11 revolving accounts and closed 5 of them and now I have 6 credit cards with a total credit limit of $23,000 with a current outstanding balance of $5,800. I also have taken out 3 student loans since I was 18 and have paid them all off. Now the only loan I have is a vehicle loan I took out through Wells Fargo last October for $12,000 at a 11.72 APR(it's pretty high, but it's my first vehicle loan), which I have paid down to approximately $7,700 in the past 6 months. myFico score range is from 671 lowest to 703 highest. I have a 25% credit utilization, 7 inquiries in the past year(1 drops off on the 15th of this month, 5 drop off by the end of August, and the last one drops off at the end of October), no late payments  or delinquencies, and a debt to income ratio of 17%. Note: I am not interested in getting any loans or lines in any other place aside from Wells Fargo since I have more than 10 accounts with them and it is convenient for me.

I am looking to purchase my first home next fall, which I am planning to live in and rent to my parents so I can build equity in the home and get on my way to investing in real estate. I am trying to get my credit score to 800 before starting the process and have budgeted to get my Credit utilization to 1% over the course of the next 12 months. My question is:

Should I refinance my vehicle and use the $5,000 cash out to get a secured personal loan or a secured personal line of credit or do both(get cash out of $5,000 for a Secured Personal Loan where funds from loan to be used as a collateral for a $5,000 Secured Line of Credit)? Which would be most beneficial to the purchase of the home? I am planning to start the process on the 19th of this month so any advice would be well received before then. I will also be in the garden starting in September so I won't have any inquiries when it comes time to purchase my home next year. Thank you guys in advance for your feedback!

[_sidhe_]

You're buying a house you plan to live in and rent to your parents? If you can't afford it without renting it to your parents, I wouldn't buy one, honestly, because you'll have to sign documents to the bank saying that you won't be using it as rental property. Honestly, what is beneficial to buying a home is a minimum of 20% down payment. I have yet to see a bank be impressed with the number of loans that pop up on a credit report. The banks (WF, B of A, Chase, etc.) I've dealt with are generally wondering what you're doing with so many pans in a short period and why you need it anyway.

They prefer the 20% down payment and high liquid assets from what I've seen. I'm not saying it's that way for every loan, but it's what I've experienced in my job as a real estate paralegal for year and years.

[jkjklkjkl]

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@Anonymous wrote:

 Note: I am not interested in getting any loans or lines in any other place aside from Wells Fargo since I have more than 10 accounts with them and it is convenient for me.

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It's obvious that you have a great grasp on how to improve your life and finances; however, this quoted thought process is really quite dangerous and short-sighted.  I would like to suggest that your focus should always be "what is best for you financally, and not what is common/familar/the most convenient to you (in most cases).  As you said, you have an 11% interest rate through Wells Fargo, but at this point, with your scores, you could've refinanced with another institution at, more likely than not, 1.49% (DCU or another local credit union, etc, etc). Additionally, how is having a loan at another institution inconvenient, with modern technology? You send things via electronic debit, and boom, it's done! I've been on credit forums long enough to see that WF rarely charises "loyal" customers, in the way of not approving loans that should've been a slam dunk approval and by giving higher interest rates on loans, comparitive to other financial institutions.

I'm not saying that you shouldn't be doing business with WF, I'm saying that, especially in light of how important money is these days (in the common and uncommon sense) and your apparent business savvy and plans, you should always be thinking about what is going to give you the best  financial return/strenght, and not what is most convenient.  Think about it this way, convenient stores are convenient, but but you pay for that convenience, by paying their inconvenient prices.

[SamsungHDTV]

You should refinance your vehicle because its a high interest rate, and get $5000 to refinance your credit cards (assuming high interest rate on credit cards and lower interest on cash out).

[jkjklkjkl]

Oh, and you're good with the credit mix you have for a mortgage I would refinance your auto loan, and keep saving for a down payment, research all available options for first-time buyers programs in your area, as they can be up great benefit, and spend sometime on the mortgage forum.  Best wishes, you're doing great!

[Anonymous]

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@_sidhe_ wrote:
You're buying a house you plan to live in and rent to your parents? If you can't afford it without renting it to your parents, I wouldn't buy one, honestly, because you'll have to sign documents to the bank saying that you won't be using it as rental property. Honestly, what is beneficial to buying a home is a minimum of 20% down payment. I have yet to see a bank be impressed with the number of loans that pop up on a credit report. The banks (WF, B of A, Chase, etc.) I've dealt with are generally wondering what you're doing with so many pans in a short period and why you need it anyway.

They prefer the 20% down payment and high liquid assets from what I've seen. I'm not saying it's that way for every loan, but it's what I've experienced in my job as a real estate paralegal for year and years.

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Yes, I would keep the monthly payments at less than 20% of my net monthly income so that when my parents decide to move back to Nicaragua I am able to pay for the home with ease until I can find another tenant. I'd have to look into the terms and conditions of the banks loans in more detail prior, but based on what I have seen is that after 90 days to a year a bank no longer is concerned about whether or not you reside in the home as long as you are making timely payments and the title/deed is not transferred over, in which case would call for immediate payment on the entire balance of the loan, but please correct me if I am wrong because I am here to learn. I want to put 20% down on the second home I purchase as an investment property. For now I am looking to get started with 5% down and a credit score of 800 or higher and I plan on paying down the principal of the home similar to the way I am approaching it with my vehicle loan to save on interest over time and build equity a bit faster. As far as for liquid assets, I am not planning on purchasing the home until I have funds in excess of $10,000 in all of my accounts and I have paid down all my debt, which I have planned to do by mid next year.

[Anonymous]

Thanks so much for your feedback! What you mentioned about doing what is best for myself financially is very sound advice and well received. I will look to refine my thought process as to look at the bigger picture and my overall financial goals as opposed to focusing on the nuances of where I have my particular accounts. Thanks for the advice and the positive comments! I will definately be spending some time in the mortgage forum!

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@jkjklkjkl wrote:

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@Anonymous wrote:

 Note: I am not interested in getting any loans or lines in any other place aside from Wells Fargo since I have more than 10 accounts with them and it is convenient for me.

---

It's obvious that you have a great grasp on how to improve your life and finances; however, this quoted thought process is really quite dangerous and short-sighted.  I would like to suggest that your focus should always be "what is best for you financally, and not what is common/familar/the most convenient to you (in most cases).  As you said, you have an 11% interest rate through Wells Fargo, but at this point, with your scores, you could've refinanced with another institution at, more likely than not, 1.49% (DCU or another local credit union, etc, etc). Additionally, how is having a loan at another institution inconvenient, with modern technology? You send things via electronic debit, and boom, it's done! I've been on credit forums long enough to see that WF rarely charises "loyal" customers, in the way of not approving loans that should've been a slam dunk approval and by giving higher interest rates on loans, comparitive to other financial institutions.

I'm not saying that you shouldn't be doing business with WF, I'm saying that, especially in light of how important money is these days (in the common and uncommon sense) and your apparent business savvy and plans, you should always be thinking about what is going to give you the best  financial return/strenght, and not what is most convenient.  Think about it this way, convenient stores are convenient, but but you pay for that convenience, by paying their inconvenient prices.

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[Anonymous]

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@SamsungHDTV wrote:

You should refinance your vehicle because its a high interest rate, and get $5000 to refinance your credit cards (assuming high interest rate on credit cards and lower interest on cash out).

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I will definately be taking that into consideration as an option. Currently the cards I have a balance on are the Chase Freedom, which now has a balance of $450 as of today and still has the 0% introductory rate until November 2015 and the Citi Simplicity, which has a balance of $4,900 and still has the 0% introductory rate until February 2016, would you recommend the same course of action given the aforementioned circumstance?

[Anonymous]

I was under the impression that an automobile loan served the purpose of satisfying the installment loan part of making good use of the Fico algorithms?

I do not have an auto loan right now and I am considering a small secured or unsecured loan for the (hopeful) boost in my score.

But if you already have an auto loan, would you see an increase by obtaining an installment loan also?

[Anonymous]

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@Anonymous wrote:

I was under the impression that an automobile loan served the purpose of satisfying the installment loan part of making good use of the Fico algorithms?

I do not have an auto loan right now and I am considering a small secured or unsecured loan for the (hopeful) boost in my score.

But if you already have an auto loan, would you see an increase by obtaining an installment loan also?

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I would believe that would be the case as far as the Fico algorithm goes, but I want to be absolutely sure that they see multiple installment loans(ie auto loans, personal loans, and student loans) with timely payments and paid off to make sure I have a well balanced credit portfolio where 1/3 has been in installment loans and 2/3 has been in revolving lines.

I think getting a small secured loan would be ideal because qualifying for a conventional loan other than a student loan may be a bit difficult if you don't have previous installment loan history, but every circumstance is different and you may be able to get an unsecured loan.