Should I Refinance Now or Wait?

Anonymous · ‎07-14-2016

Hi everyone. Newbie here with my first post. I'm kinda lost here, so would love to hear your thoughts.

I'm working on improving my credit. I'd like to refinance the current loan I have with GM financial. I bought a 2013 Chevy Equinox in February of this year. My payment is $359/month for 72 months at 11.35%.

My initial thought was to wait a year and try refinancing then. The thought was that my credit would be better at that point.

This week, I applied for & was approved for some credit cards, thinking they would help my scores increase over time. I got the GM buypower ($300), citi double cash ($1000) & DCU ($1000).

I started looking into DCU after reading about them on the boards. I spoke with someone in the loan department who told me with my score of 630 (EQ fico 5), if I was approved, I'd get 5.99%. They would also use the hard pull from earlier this week.

Any thoughts on if I should apply for this now or wait a bit for my 3 new cards to start reporting. Credit wise, I've always had to take whatever loan was offered & I feel unsure about what to do, now that I'm starting to have options. Would appreciate everyones opinions. Thanks!

StartingOver10 · ‎07-14-2016

@Anonymous wrote:
Hi everyone. Newbie here with my first post. I'm kinda lost here, so would love to hear your thoughts.

I'm working on improving my credit. I'd like to refinance the current loan I have with GM financial. I bought a 2013 Chevy Equinox in February of this year. My payment is $359/month for 72 months at 11.35%.

My initial thought was to wait a year and try refinancing then. The thought was that my credit would be better at that point.

This week, I applied for & was approved for some credit cards, thinking they would help my scores increase over time. I got the GM buypower ($300), citi double cash ($1000) & DCU ($1000).

I started looking into DCU after reading about them on the boards. I spoke with someone in the loan department who told me with my score of 630 (EQ fico 5), if I was approved, I'd get 5.99%. They would also use the hard pull from earlier this week.

Any thoughts on if I should apply for this now or wait a bit for my 3 new cards to start reporting. Credit wise, I've always had to take whatever loan was offered & I feel unsure about what to do, now that I'm starting to have options. Would appreciate everyones opinions. Thanks!

^^^ My opinion only. Refi now. Get away from that 11.35%. Continue to work on your credit.

jrands · ‎07-14-2016

What is the term of the 5.99%? Is it 60 months or the same as your current loan at 72 months? Also, how many payments have you made already?

Anonymous · ‎07-15-2016

Thank you. I think I'll at least see what the terms would be, since it wont be another hard pull.

Anonymous · ‎07-15-2016

Jrands, I didnt get that far with them, because I didnt have any info with me. My current loan is for 72 months & I've made 5 payments so far. Another will be made in about 2 weeks. I'd really like to lower my monthly payment, but also want to be smart about it.

Appleman · ‎07-15-2016

You can refinance as many times as you like provided the bank will do the deal. You have to make sure it works for you.

I did some rough math for you to see how different terms play out. This should at least give you an idea.

Your original loan:

$18,685

72 months

11.35%

$359/month

You should now owe about $17,756 after your 5 on-time payments.

DCU Loan

$17,756 (approximate amount of loan needed)

5.99%

Term ???

Payment ????

If they give you a 5 year (60 month) loan:

$17,756

60 months

5.99%

$343/month

This deal would be a no brainer, saving you 6 months of payments and a total of $3,361 over the life of the loan (comparing both loans starting today with a balance of $17,756)

If they go 5.5 years (65 month loan):

$17,756

5.99%

65 months

$316./month

Again, a good deal for you. You are saving $3,067 over the life of the loan and reducing your current payment by $43 a month. Number of total payments stays the same between both loans (5-6 payments from first loan plus 65 payments for second loan)

Who knows, maybe they go the full 72 month:

$17,756

5.99%

72 months

$294.18/month

This still saves you $2,770 compared to the current loan/balance and cuts the payment $65 a month but you make 5-6 additional payments as compared to the original loan.

The sweet spot IMO is 65 month. Good luck and please let us know how things turn out.

Anonymous · ‎07-15-2016

Nice work Appleman. I say go for it, with any of he above terms, all winners. Double bonus is no hard pull. Freeing up money in the monthly budget gives you a little more room to not build balances on your new cards.

Congrats!

jrands · ‎07-15-2016

@Appleman wrote:
You can refinance as many times as you like provided the bank will do the deal. You have to make sure it works for you.
I did some rough math for you to see how different terms play out. This should at least give you an idea.

Your original loan:
$18,685
72 months
11.35%
$359/month

You should now owe about $17,756 after your 5 on-time payments.

DCU Loan
$17,756 (approximate amount of loan needed)
5.99%
Term ???
Payment ????

If they give you a 5 year (60 month) loan:
$17,756
60 months
5.99%
$343/month
This deal would be a no brainer, saving you 6 months of payments and a total of $3,361 over the life of the loan (comparing both loans starting today with a balance of $17,756)

If they go 5.5 years (65 month loan):
$17,756
5.99%
65 months
$316./month
Again, a good deal for you. You are saving $3,067 over the life of the loan and reducing your current payment by $43 a month. Number of total payments stays the same between both loans (5-6 payments from first loan plus 65 payments for second loan)

Who knows, maybe they go the full 72 month:
$17,756
5.99%
72 months
$294.18/month
This still saves you $2,770 compared to the current loan/balance and cuts the payment $65 a month but you make 5-6 additional payments as compared to the original loan.

The sweet spot IMO is 65 month. Good luck and please let us know how things turn out.

This is good stuff Appleman. Was planning to do the same calcs along with figuring out much of a difference it would be if Dizexhaled waited another 12 months before doing the refi. But the APR another 12 months down the road would be a complete guess though. But definitely it's a fine balance between the new APR, new loan term, and the loan amount to determine the best overall savings.

For the 65-month term, I got slightly different #s

If they go 5.5 years (65 month loan):
New Loan Amount: $17,756
5.99%
65 months
$320./month
Total (New) Loan Cost: $20,834 (=65x$320)
Total (Old) Loan Paid To This Point: $1,795 (=5x$359)
Combined New+Old Loan Cost: $22,629 (=20,834+$1,795)
Total Old Loan Cost: $25,850
Overall savings: $3,220

Say Dizexhaled waited another 7 months to make it a year, these are the #s I got:

Term: 60 months (=72 month-12 months will have paid)
Remaining/New Loan Amount: $15,621
APR: 5.99%
Monthly: $302
Total (New) Loan Cost: $18,115 (=60x$302)
Total (Old) Loan Paid To This Point: $4,308 (=12x$359)
Combined New+Old Loan Cost: $22,423 (=$18,115+$4,308)
Total Old Loan Cost: $25,850
Overall savings: $3,427

Appleman · ‎07-15-2016

To clarify, I ignored the balance already paid and looked at what staying with the current loan will cost from this point forward and what a new loan with better terms will come out to be savings wise.

Any of the three scenarios save you money both monthly and overall.

Anonymous · ‎07-15-2016

Wow! Thank you both sooo much for this info. It was really helpful.

I called today and spoke with someone. She confirmed that with my 630 score, i would get 5.99%. If I open a checking account & have direct deposit to it, it will go down to 5.49%. She also gave me the next 2 tiers, credit score 640 - 674 is 3.49% & at 675 it goes down to 2.49%. She also said I always had the option to refinance again in a couple years if I wanted.

While the 10 points to 640 isnt unattainable, im pretty sure i'll actually be dropping a few points because of the new accounts. So I decided to go ahead & apply now.

I called back this afternoon and we settled on 5.49% for 65 months at $320 per month, with the direct deposit. She originally came back with $340 per month, but that included some kind of insurance in case I got sick or lost my job at $20 per month. So I had her remove that. I did get the gap insurance for $4 per month. She also mentioned that she was putting a note in my account to see if they can increase my credit card limit. She said someone will contact me via email within the next 24 business hours to close the loan if everything looks ok.

Since then, I've received an email that says I'm approved & asked me to upload pay stubs & the refinance Info Sheet. Hoping that means all will go well, but these emails dont give specific info, so who knows. I'll definitely update to let everyone know the final.

What I will say is that everyone I've dealt with at DCU was super friendly. Even as the lady was taking my info for the loan request, she must have thanked me for my business 3 times. I could get used to that, lol!

Again, thank you both so much for the numbers breakdown.

Fingers crossed! :-)