Any downside to auto refinance?

[Anonymous]

Greetings all.

My problem has always been more lackof credit utilization more than specifically "bad" credit.

I financed a portion of a truck about a year and a half ago just to help build credit. I went through Ally at 8.73% and haven't had any complaints - just put it on autopay and things are going smoothly.

I've been avoiding hard pulls, but Capital One, who I have a good credit cards relationship with, offered to refinance without a hard pull, so I clicked. they offered four options, the most intriguing of which raises my payment about $25, drops my rate to 6.09%, and saves about $1200. this seems like a no-brainer from a financial perspective, but are there any negatives to credit scoring - like decreasing average age of credit, etc.?

Thanks for looking,

[Girlzilla88]

To me that wouldn't be enough of a difference for me to pull the trigger.     I'm not sure if it will affect your age as when I refinanced my vehicle there was no skip in months and my old account with Capital One still shows as does my current CU with the new amount but I went from a 16 or 17% down to a 3.whatever my signature says lol.      So if you do a refinance yes it is the best time to at 1-2 years but I only recommend it if there would be a big difference like with me for example if it's a 1-2% difference honestly I feel like it won't do much good.     Plus your payment will go up 25 dollars you can always make extra payments on your current amount and save in interest or make interest only payments and that would help too

[sccredit]

A $1,200 savings over the life of the loan would be compelling to me as well.  I assume the $25 higher payment at a lower rate is due to a shorter term?

As far as the downside - yes a reduction of AAoA would have a ding but after making on time payments for a period of time that would be negated.  Question is - do you have a need for credit in the next 6-12 months?

[Anonymous]

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@sccredit wrote:

A $1,200 savings over the life of the loan would be compelling to me as well.  I assume the $25 higher payment at a lower rate is due to a shorter term?

As far as the downside - yes a reduction of AAoA would have a ding but after making on time payments for a period of time that would be negated.  Question is - do you have a need for credit in the next 6-12 months?

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Yes that is the question.

If you were planning on another loan or perhaps big thing such as mortgage, your credit will suffer

from a "new" account with the auto refi. and the new auto refi will also bring a higher utilization,

as it will start out at 100% again. each payment will bring it down lower from that 100%

You current loan utilization % can be mathmatically figured out by taking the remaining balance divided by the starting balance.

If you see no need to use your credit in the near future, then $1200 saved is $1200 saved.

But as the other post mentioned, money can also be saved by making larger or extra payments.