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Regular Contributor
mikie209
Posts: 121
Registered: ‎09-04-2013

When to refinance??

I got an auto loan back in august and the interest is a little high. I am currently working on my credit score and its slowing increasing. I know the loan is not that old but how long do you think I should wait to refinance? The current payments are about $400, and I am having no problem paying them. I would rather have a lower interest rate but continue to pay the same amount to pay it off faster.

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Moderator
Revelate
Posts: 8,335
Registered: ‎12-30-2011

Re: When to refinance??


mikie209 wrote:

I got an auto loan back in august and the interest is a little high. I am currently working on my credit score and its slowing increasing. I know the loan is not that old but how long do you think I should wait to refinance? The current payments are about $400, and I am having no problem paying them. I would rather have a lower interest rate but continue to pay the same amount to pay it off faster.


You can refinance at any time.  I personally am in favor of waiting for six months before refinancing but that's more from a FICO quality tradeline perspective than any real need.  If it saves you money, can refinance right now assuming your score supports a better rate.

 

Virtually auto loans are simple interest (any that isn't, you don't want), as such if you want to pay it off early, see whether you can get a smaller payment (longer term even) but keep paying the same amount.   

 

End of the day it's going to come down to what APR you have now, and what your FICO score happens to be.

Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
Current Score: EQ 04 679, EQ 8 708, TU 711, EX 702* (07/14/14, EX older)
Goal Score: 700 on EQ '04 (01/01/15)


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Established Contributor
SamsungHDTV
Posts: 517
Registered: ‎10-25-2011

Re: When to refinance??


mikie209 wrote:

I got an auto loan back in august and the interest is a little high. I am currently working on my credit score and its slowing increasing. I know the loan is not that old but how long do you think I should wait to refinance? The current payments are about $400, and I am having no problem paying them. I would rather have a lower interest rate but continue to pay the same amount to pay it off faster.


Time frame is more of an indirect factor. You should refinance anytime your credit has made an 'significant' improvement. If you originated the auto loan in March and two negative marks fell off your reports on April boosting your score then you may want to refinance in April. Vice versa, if six months go by and your credit report looks pretty much the same then refinancing may not help yet. This is generally speaking, because some credit unions may take the payment history on the autoloan tradeline  and give you a better rate even if your score hasn't risen 'significantly'. Bottom line is to figure out how much your credit score has risen since you've taken out the loan.

I'm a personal banker and do a lot of auto loans serving the Houston area.
I suggest first time car buyers to read the sticky guide in the auto loan section.
I try to check these forums often, but if I missed your post, please feel free to message me with a link to it.
Regular Contributor
mikie209
Posts: 121
Registered: ‎09-04-2013

Re: When to refinance??

Thanks! That makes sense. I just didnt know if it would look back refinancing so quick. My score will have increased by at least 50 by the time I am going to refinance. The lower interest rate is going to help me pay it off quicker because I will be making the same payment amount each month. When applying for the refinance should I choose the lower amount of months so the lender sees that I want to pay it off quick? I already have one car loan on my report that is paid off with no late payments and I always made extra payments a month on that loan also.

Barclay Mastercard $3200; USAA Mastercard $500; Cap1 $300; NFCU Mastercard $6000; Military Star Card $4100
Moderator
Revelate
Posts: 8,335
Registered: ‎12-30-2011

Re: When to refinance??


mikie209 wrote:

Thanks! That makes sense. I just didnt know if it would look back refinancing so quick. My score will have increased by at least 50 by the time I am going to refinance. The lower interest rate is going to help me pay it off quicker because I will be making the same payment amount each month. When applying for the refinance should I choose the lower amount of months so the lender sees that I want to pay it off quick? I already have one car loan on my report that is paid off with no late payments and I always made extra payments a month on that loan also.


Doesn't matter, if you want to pay the loan off the fastest and you're making extra payments, the longer term is typically beneficial (lower payment, and as such more of your fixed payment goes to principal).

 

Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
Current Score: EQ 04 679, EQ 8 708, TU 711, EX 702* (07/14/14, EX older)
Goal Score: 700 on EQ '04 (01/01/15)


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