topic Re: Car refinance: Good idea or bad idea to extend loan terms? in Auto Loans

Car refinance: Good idea or bad idea to extend loan terms?

OroroMunroe — Fri, 18 Mar 2016 04:20:44 GMT

Hello all,

I am in the process of refinancing my car loan. I can extend the loan for a much lower payment and lower rate (roughly $100 less each month) or keep my current number of months for roughly $20 less than my current payment with a lower rate. My refinance terms would save me thousands over the life of the loan, no matter which option I choose. My car loan is fairly new. What would you do? I think my head is saying do not extend, but my heart is saying I can use an extra 100 each month for other stuff. Decisions, decisions!

Re: Car refinance: Good idea or bad idea to extend loan terms?

Chris679 — Fri, 18 Mar 2016 04:33:01 GMT

Take the longer loan but still pay as much as you can per week. This is the best of both worlds and you will be ahead on the loan giving you a cushion if something comes up and you need cash flow.

Re: Car refinance: Good idea or bad idea to extend loan terms?

Chris679 — Fri, 18 Mar 2016 04:35:08 GMT

Assuming the rates are the same, if not take the lower rate.

Re: Car refinance: Good idea or bad idea to extend loan terms?

Anonymous — Fri, 18 Mar 2016 05:16:28 GMT

@Chris679 wrote:
Take the longer loan but still pay as much as you can per week. This is the best of both worlds and you will be ahead on the loan giving you a cushion if something comes up and you need cash flow.

THIS ; This option gives you more breathing room. If an emergency comes up you have more wiggle room. If not just send the extra funds in.

Re: Car refinance: Good idea or bad idea to extend loan terms?

C7LT1 — Fri, 18 Mar 2016 09:44:10 GMT

You have to ask yourself what is the reason for refinancing. Is it to lower your payment or to save money? Lower your payment then extend the loan. Save money then go with a fewer months.

Chris679 gave good advice...extend the loan but keep paying the same amount. Best of both worlds.

Also, don't think about what can do with an extra $100 today think about what you can do with extra car payment once it is paid off.

Re: Car refinance: Good idea or bad idea to extend loan terms?

OroroMunroe — Fri, 18 Mar 2016 17:30:03 GMT

Thank you for your replies! The extended loan would have a slighly higher interest rate than the other option. Thanks for all of the sound advice! Have a wonderful Friday!

Re: Car refinance: Good idea or bad idea to extend loan terms?

C7LT1 — Sat, 19 Mar 2016 02:43:31 GMT

@OroroMunroe wrote:
Thank you for your replies! The extended loan would have a slighly higher interest rate than the other option. Thanks for all of the sound advice! Have a wonderful Friday!

What leave us hanging, what option are you going to choose?

Answering this will put a nice little bow on this thread and may help another member down the road who uses the search function.

Re: Car refinance: Good idea or bad idea to extend loan terms?

OroroMunroe — Sat, 19 Mar 2016 02:54:35 GMT

I'm leaning toward refinancing with the lower rate without extending. This statement resonated with me:

"Also, don't think about what can do with an extra $100 today think about what you can do with extra car payment once it is paid off." I will most likely refinance again in 6 months. Thanks so much for the advice!

Re: Car refinance: Good idea or bad idea to extend loan terms?

nycplayboy78 — Sat, 19 Mar 2016 16:55:45 GMT

@OroroMunroe wrote:
Hello all,
I am in the process of refinancing my car loan. I can extend the loan for a much lower payment and lower rate (roughly $100 less each month) or keep my current number of months for roughly $20 less than my current payment with a lower rate. My refinance terms would save me thousands over the life of the loan, no matter which option I choose. My car loan is fairly new. What would you do? I think my head is saying do not extend, but my heart is saying I can use an extra 100 each month for other stuff. Decisions, decisions!

Storm is that you hun??!! LAWD!!! Even Goddesses need good credit....FAINTS!!!! LOL!!!

Re: Car refinance: Good idea or bad idea to extend loan terms?

OroroMunroe — Sun, 20 Mar 2016 00:10:28 GMT

@nycplayboy78 wrote:
@OroroMunroe wrote:
Hello all,
I am in the process of refinancing my car loan. I can extend the loan for a much lower payment and lower rate (roughly $100 less each month) or keep my current number of months for roughly $20 less than my current payment with a lower rate. My refinance terms would save me thousands over the life of the loan, no matter which option I choose. My car loan is fairly new. What would you do? I think my head is saying do not extend, but my heart is saying I can use an extra 100 each month for other stuff. Decisions, decisions!
Storm is that you hun??!! LAWD!!! Even Goddesses need good credit....FAINTS!!!! LOL!!!

Flying gets tiresome

Re: Car refinance: Good idea or bad idea to extend loan terms?

Anonymous — Sun, 20 Mar 2016 00:51:43 GMT

i wouldn't extend it (especially if you don't plan on getting GAP)
in a "real world" scenario you'll likely use that extra $100 for non essentials and you'll be spending it on things you don't need because you think you have more money. it's easy to get upside down if you keep refinancing or extend terms

Re: Car refinance: Good idea or bad idea to extend loan terms?

Anonymous — Sun, 20 Mar 2016 12:17:04 GMT

pay the price you are now. Pay extra 100 or so to the principal each month and this will make you pay the car off faster and save interest. For instance, 5 year loan, 60Months = $6k If your Monthly is 500 per a month that would decrease your interest by a lot and make you pay off your car 1 year in advance. It will decrease your interest because you wont be paying 1 year of interest on the car I think APR is calculated per month. So if your car is 8% per month, that would be 8% of 500 goes to interest. Just looked at my receipt and this is correct. save $40 dollars a month and $480 dollars total from paying interest.

Re: Car refinance: Good idea or bad idea to extend loan terms?

Chris679 — Sun, 20 Mar 2016 11:37:52 GMT

Interest is calculated daily based on a daily rate of apr/365. Every time you make a payment it is applied first to the interest then to the principal.

Re: Car refinance: Good idea or bad idea to extend loan terms?

Anonymous — Sun, 20 Mar 2016 12:15:57 GMT

@Chris679 wrote:
Interest is calculated daily based on a daily rate of apr/365. Every time you make a payment it is applied first to the interest then to the principal.

nope, unless you tell them to put it to the principal. The extra payment will just go towards the next Month's payment.

Re: Car refinance: Good idea or bad idea to extend loan terms?

Anonymous — Sun, 20 Mar 2016 12:55:40 GMT

actually it's both. the extra goes towards principal but will also lower your nent payment due.

Re: Car refinance: Good idea or bad idea to extend loan terms?

Chris679 — Sun, 20 Mar 2016 21:19:02 GMT

Archange1, no offense but you don't know what you are talking about. You are going around spreading false info on a forum that people come to for correct information.

Re: Car refinance: Good idea or bad idea to extend loan terms?

Anonymous — Sun, 20 Mar 2016 21:39:58 GMT

@Chris679 wrote:
Archange1, no offense but you don't know what you are talking about. You are going around spreading false info on a forum that people come to for correct information.

Non taken. I just pulled my receipt and the APR taken from the monthly payment was exactly the amount I had. Example, 500 x .0.03 went to the interest. Whenever I pay extra at my credit union, it goes towards the next month payment and lowering the pay off time but when i did that it also took out more interest. Unless I tell them to place it to the principal, i was still putting Money towards the interest.

What could hurt from telling the bank teller, here is my payment for 500 for this month. Could you put this extra 100 towards the principal?

Thanks XTERROR for saving me

Re: Car refinance: Good idea or bad idea to extend loan terms?

Shooting-For-800 — Sun, 20 Mar 2016 21:38:11 GMT

refi at lower rate and make extra payments to stay ahead and less interest.

Re: Car refinance: Good idea or bad idea to extend loan terms?

Chris679 — Sun, 20 Mar 2016 22:20:23 GMT

@Anonymous wrote:
@Chris679 wrote:
Archange1, no offense but you don't know what you are talking about. You are going around spreading false info on a forum that people come to for correct information.
Non taken. I just pulled my receipt and the APR taken from the monthly payment was exactly the amount I had. Example, 500 x .0.03 went to the interest. Whenever I pay extra at my credit union, it goes towards the next month payment and lowering the pay off time but when i did that it also took out more interest. Unless I tell them to place it to the principal, i was still putting Money towards the interest.

What could hurt from telling the bank teller, here is my payment for 500 for this month. Could you put this extra 100 towards the principal?

Thanks XTERROR for saving me

Assuming your apr is 3% and we are talking about a month with 30 days then I would guess the principal amount of your loan to be about $6083. It is a total coincidence that 3% of $500 equals the $30 interest charge per month because the payment amount has no effect on the interest charge. To calculate daily interest rate we would take the principal $6083 * .03 / 365 = $.50 per day of interest. That's $15 of accumulated interest over 30 days.

There would be no hurt in the scenario you mentinoed but there would be no benefit to a principal only payment either. You just paid off the $15 of interest due with your normal $500 payment so anything over that is going 100% to the principal. If you wait one day to give the teller the same $100 and ask for principal only you would pay an extra $.50 on the principal but you still have to pay that interest when you make your regularly scheduled monthly payment. The benefit for you is saving interest that would have been charged on that $.50 but that is only one hundredth of a penny of the course of the month! If you just hand that $100 to the teller and let them pay as usual you lose the hundreth of a penny but you are now $100 ahead on your loan and have added flexibility. Next month or any month after that you can only pay $400 and still be current. People think they are gaining something with principal only payments when all they are really doing is losing flexibility to save a tiny fraction of a penny in interest charges.

What I do is pay weekly based on the monthly payment / 4. That way I save on interest by paying weekly rather than once per month. I also gain make an extra payment every three months since there are 4.3 weeks per month and that adds up quickly. Also because I get paid weekly I don't even notice the money is gone because it comes out at the same time as my direct deposit.