Any Downside to Refinancing with BoA?

[TSlop]

I currently am about 2 years into a 7 year auto loan @ 3.99% with PSECU. Since I have about 5 years left (or less since I always overpay), is there any downside to refinancing at BoA? Their rate would be at 3.04% for 60 months.

As far as I can tell, my monthly payment will drop ~$30. Unless there are any fees to refinance at BoA, I don't see any downside, except getting an inquiry. With a ~$30 lower payment, more of my overpay will go to the principal.

[Loquat]

While $30 is $30 you have to ask if it's easier just to pay a little more on your current auto loan to reduce the amount you pay in interest or take the hit of an inquiry and a new account reporting.

I'm all for savings but it seems like the same thing can be accomplished by paying a little ahead on your current loan thus reducing the amount of interest you'll pay overall on the loan anyway.

[4sallypat]

Good point @Loquat - instead of a HP and for only $30 different, your current loan seems competitive.

I'd just pay extra towards the auto loan and shorten the length of term.

You would save money at the end if you double your car payments or add a couple extra payments each year..

[disdreamin]

If you are saying your monthly car payment would go down $30, if you pay your car loan off in 5 years you're talking a savings of $1800. Personally, I'd take a hard pull for $360 a year savings/$1800 over five years.

As others have noted, if you can accelerate payment you'll save on interest with either loan. However, if you'll be carrying a loan for another 4+ years, I'd pull up an amoritization schedule/calculator and run the numbers to see what the actual difference will be. Run both loans (you can backdate the 7 year loan to the actual start date) and add up the interested between now and the end of the loan term. Unless you're going to hammer the payments and be done with the loan in a year or two, I'd bet the amount you'd save would be appreciable, judging by what you've said.

[TSlop]

Thanks for the responses. As much as I'd like to pay even more, we have our second baby due later this year, and I don't foresee wanting to add another $30 on top of the extra I already throw on (besides and extra I might throw on from the stimulus). I was mostly just concerned if there is a downside, other than the HP. For instance, PSECU adds $1k to the loan if you refinance an existing PSECU loan, but I don't see any fees with BoA.

However, I will have to consider the amortization schedule, so thank you for bringing that up. I didn't think about that originally, and maybe "starting over" by refinancing will put higher interest portions back to the front, so more of my initial payment might be headed to interest again. So maybe this might not be saving me quite as much as I think.

[disdreamin]

When I tried running made-up numbers I couldn't get it to show a $30 a month difference, to be honest. I'd definitely look at the total interest on both loans from now until anticipated pay off date and go by that. Good luck and congrats on the new little one on the way! Kids are expensive haha