Help understanding Auto Loan, and is refinancing an advantage at this point?

[Anonymous]

Right now I have a loan via Consumer Portfolio Services. The original amount was $12264 with an interest rate of 20.45% for 5 years. My first payment off $330.77 was made in January of this year and most recent on 06/08/2015. I'm not too savvy with math, but when I realized just how much interest I have paid I was pretty disgusted, but accepting because my credit isn't that great now, and was REALLY ugly when I purchased the vehicle. Now my scores have broken into the 600's. Not great, but I'm proud of my progress so far. I have also been paying a few bucks extra, only to realize that that really isn't helping my principal at all.

Recently, I hit up Blue Harbor about refinancing and was offered $270/month at 13.06% for 72 months for the $11,400 that I have left on the loan. While cutting my payments by $100 sounds great, I definitely do NOT want to pay for this vehicle for six years.

My question is this: Should I take their offer and then refinance again when my credit improves even more? As I said, I'm sort of "math stupid" and all the percentages, amortization, and all that really don't make sense to me. The breathing room on the payment would be great, but would it make financial sense?

All I know at this point is that with five payments of $350, I've knocked only $895 off my principal. If I accepted the offer from Blue Harbor and continued with my $350/month payment, how can I map out just how much that would help me in the long run? Would knocking 7% of interest off the loan help at all given the extended loan term?

Sorry for the ignorance...and thanks in advance for any replies!

[StartingOver10]

Take the deal. Continue your $350 payments to knock down the principal and then when your scores are better, refi again. Get out of that 20% loan as fast as you can. Yes, it makes a difference.

Go to bankrate.com and put in your original terms of your current loan and run an amortization schedule to see how much interest you would pay if you stuck to your current loan.

Then put in the terms of the new loan to see how much interest you save over the term by getting the new loan.  You will be amazed at how much you will save.

[Anonymous]

OK, I will as soon as I'm at my PC. Are there any negatives to refinancing several times over a period of years?

[StartingOver10]

Can't think of any negatives to refinancing a couple of times to reduce your interest to a reasonable rate.  Only exception would be if you extended the term too long or had high costs associated with the refi. Naturally, before you refi you will compare costs and rate and terms so you end up with better terms rather than worse terms

[Anonymous]

Also, on the Bankrate auto loan calculator, you can show the amortization, and then there's an area to put in extra payments. Put in the difference between the new payment and your old payment as an extra monthly payment to show how beneficial it will be to make the extra payments. Look, say, one year out and see how much you'd owe with the required payments and how much you'd owe with the $350 payment. It's motivating. GL

[Anonymous]

Thank you guys SO much. I hate to admit ignorance about something, but that stuff is extremely confusing. I feel like I'm walking on a minefield with it sometimes. 

I'm going to get Blue Harbor to send me the details, and then go to my local credit union with it to see if they can make a better offer. If not, I will take the advice given and take the deal thats on the table and build my score on up until I can get a sweet offer from a local CU. 

Again, I thank all of you! 

[Hoya08]

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@StartingOver10 wrote:

Can't think of any negatives to refinancing a couple of times to reduce your interest to a reasonable rate.  Only exception would be if you extended the term too long or had high costs associated with the refi. Naturally, before you refi you will compare costs and rate and terms so you end up with better terms rather than worse terms

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Agree with this.  Make sure to compare total interest paid if you look to refi again, and again, and again.

As everyone has already stated, refi as soon as possible.  Hopefully the CU won't require a down payment to stay within Loan to Value (LTV) limits.  If you are able to refi at the rate you pointed out, and if you continue to make the same $350 payments, you'll save around $3k in interest payments, and pay off the loan around 40 months.

[Anonymous]

Thank you! In mentioning LTV, is there a preferred source for finding the value of your vehicle? I'm familiar with KBB, but would I be looking at trade in value, private party, or another value to get close to the LTV? Fortunately, in any instance I seem to not be too terribly upside down on the loan. Its a Toyota which, thankfully, holds value quite well. 

Also, I'm waiting to hear back from the oft suggested DCU to see if they have an offer for me. From the outcomes I've seen on here based on score criteria they may very well be able to make me an even better deal. Kepping my fingers crossed!  

[Hoya08]

Banks use various sources to asses car values.  From my experience USAA uses BlackBook, and PenFed uses NADA retail values.  Use NADA, a free service, as a rough guide to determine your LTV.