topic Re: Tempted to refinance my car in Auto Loans

Tempted to refinance my car

CreditOCDinCali — Sat, 30 May 2015 05:33:15 GMT

I purchased my car back I'm 2012. I had a really bad score back then. It was 490 or somewhere around there- the lowest I've ever had! I needed a cat badly. So I took a loan with GM Financial with a 22% interest rate. I know, Yikes! I plan on buying a home within the next 12 months. My score is 589. I keep getting offers from Capital One and other lenders to refinance and cut my payments in half. I'm afraid if I refi it'll hurt my chances to buy a house within the next 12 months. Any advice is appreciated!

Re: Tempted to refinance my car

dabrian — Sat, 30 May 2015 07:37:52 GMT

Definitely. What is keeping your scores down?

Re: Tempted to refinance my car

CreditOCDinCali — Sat, 30 May 2015 13:22:58 GMT

Well my score is actually getting better. I didn't have any established credit, just the cat loan and student loan. I finally opened up 4 credit cards, so I'm on my way to building my credit. My concern here though I s if I refi now, will it hurt my chances of home ownership within the near future (1 year from now).

Re: Tempted to refinance my car

StartingOver10 — Sat, 30 May 2015 13:28:10 GMT

No you won't hurt your chances of homeownership if you refi your vehicle. In fact, it will help your DTI assuming the rate you get will be much lower than your current rate.

Re: Tempted to refinance my car

superdad — Sat, 30 May 2015 13:52:25 GMT

@CreditOCDinCali wrote:
, just the cat loan and student loan. (1 year from now).

Why would you refi a cat? Can't you get them free at a shelter? LOL

Re: Tempted to refinance my car

CreditOCDinCali — Sat, 30 May 2015 15:11:58 GMT

Lol, darn spellcheck. I normally use my phone versus my computer to access the forums, and my phone over to "correct" me.. haha, but I'm sure you all know I mean car

Re: Tempted to refinance my car

SamsungHDTV — Sat, 30 May 2015 16:50:30 GMT

You should refinance. I think you'll be okay in a year when you go for the house. However, my main concern is that if you're at a 22% interest rate, your car loan might be upside down. What is your principle balance on the loan and the current car value?

Re: Tempted to refinance my car

CreditOCDinCali — Sat, 30 May 2015 18:04:55 GMT

Fortunately it's a Honda, they're known to hold their values. I owe around 12,300 and on Kelly Blue book my car is worth about 9,600. It could be worse. How will this affect my refinance?

Re: Tempted to refinance my car

StartingOver10 — Sat, 30 May 2015 18:55:44 GMT

@CreditOCDinCali wrote:
Fortunately it's a Honda, they're known to hold their values. I owe around 12,300 and on Kelly Blue book my car is worth about 9,600. It could be worse. How will this affect my refinance?

You will most likely have to bring in some cash to refi as the LTV is limited to about 110% IIRC. This varies from lender to lender - so ask first.

It will be based on year, make, model and mileage. Before you apply ask the LO what their LTV guidelines are for a refi.

It is well worth it to refi out as soon as you can do so - the high interest rate makes it difficult to actually pay down any principal with your normal payment. You would have to make much larger payments to reduce the principal. It might be a little difficult to bring in the cash, but do what you have to do to get the extra cash to make that refi. It will be a good long term strategy for you and really help with the home financing too (assuming you get a lower rate). DTI from a high payment auto loan is one of the things I see most often kill mortgage apps. I'm a Realtor so this subject comes up all the time.