Refinancing: Bad Idea?

[Cleanmachine]

What is the interest rate from your CU ?????

Do the math before you make a decision.

Having a greater cash flow is great, but, you should consider what the over all costs would be.

Extending the contract may not be the best financial decision.

[Anonymous]

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@Cleanmachine wrote:

What is the interest rate from your CU ?????

Do the math before you make a decision.

Having a greater cash flow is great, but, you should consider what the over all costs would be.

Extending the contract may not be the best financial decision.

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Extending the term for a lower rate does not control how long it takes to pay off the loan.  As previously posted, the strategy was to continue paying the same dollar amount which means greater principle reduction and having the option of making an occassional lower payment if an unexpected expense came up.

Lower interest rate accrues less interest charges against the same balance.  Having the flexibility to make the personal decision on how to best use the savings is always a great financial option, whether used to reduce debt or pay other expenses with the money previously being thrown away to the bank.

Message Edited by txjohn on 05-03-2009 02:14 PM

[Cleanmachine]

Without knowing the amount and number of months on the current auto loan, and without knowing the interest rate on the proposed refinance of this loan, it is premature to state one way or another, if it would be a good idea.

There are several "KEY" factors that have been omitted to make a sound financial decision.

I again would highly suggest obtaining the Interest rate and the number of months for the refinance contract and complete a full mathematical work up prior to making a decision.

[Anonymous]

Maybe I missed something.  I understood the OP to state:

1.  Currently has a $17k loan at 7% APR and $360 payment.

2.  Has been preapproved for a "Lower APR" loan and reduced payment.

3.  If item #2 is correct, then by continuing to pay the current dollar amount against the new loan, OP will pay the loan off faster by applying greater amounts to principle.

4.  Even if the CU was financing at the same APR but allowing for a longer term, the OP can continue to pay the same amount as current, yet retain the option of paying the lower payment "occassionally" if an unexpected expense arose or a tight month surfaced, similar to the option of making a minimum payment on a CC.

So, by my math, unless the new loan APR is "higher" than the current loan, it provides better options, flexibility and reduced interest charges if the new APR is lower.

Obviously the OP needs to confirm all facts and figures from the CU and make sure they are getting an equal or preferably lower APR, but short of that, I think that the loan presents many potential benefits based upon the OP statements.

In addition, the OP also stated that now being in a mortgage, they were concerned with cash flow options.  A new loan does provide more options, though as I suggested, I continue to encourage no reduced amount be paid to the loan but use any savings toward faster debt reduction, while retaining the flexibility and options of lower payment for cash flow management.

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@Cleanmachine wrote:

Without knowing the amount and number of months on the current auto loan, and without knowing the interest rate on the proposed refinance of this loan, it is premature to state one way or another, if it would be a good idea.

There are several "KEY" factors that have been omitted to make a sound financial decision.

I again would highly suggest obtaining the Interest rate and the number of months for the refinance contract and complete a full mathematical work up prior to making a decision.

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[Cleanmachine]

Nothing personal.

I just disagree with your advise to the OP "Yes, its' a good idea to refi for a lower interest rate" without knowing all the facts and figures.

I stand by my previous suggestion that OP needs to do the math prior to following your advise.

Just a second opinion.

I trust I have not offended you.

[Anonymous]

Nope, I'm not offended in the least.  I was just curious what "KEY" factors had been left out, in your opinion, to prevent a preliminary opinion of the basic validity of the loan? 

We know the new loan amount: $17k, new loan term: 60 month, new loan payment: $290 and the new loan APR range: less than 7%. 

So, I felt there was adequate information presented to provide an opinion as I stated. 

Under what circumstances, or in any possible scenario, is a lower APR not a good financial decision?  Can you give an example how refinancing an existing loan into a lower interest rate is a bad financial decision, I can't come up with one, with the only exception being the extension of time in debt if only making the minimum payment.

Anyway, opinions are welcome, that's what this forum is for.  And just as you stand by yours, I continue to stand by mine.  Lower interest, faster debt reduction and financial flexibility are good financial decisions, IMO

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@Cleanmachine wrote:

Nothing personal.

I just disagree with your advise to the OP "Yes, its' a good idea to refi for a lower interest rate" without knowing all the facts and figures.

I stand by my previous suggestion that OP needs to do the math prior to following your advise.

Just a second opinion.

I trust I have not offended you.

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Message Edited by txjohn on 05-04-2009 04:24 PM