Best plan for getting second (or next) auto loan...

[Anonymous]

Hoping you guys can help me decide what my best option would be for securing either a second auto loan, or next auto loan (after paying off my current one).

I currently have an auto loan at an outrageous APR that I owe approx. $3,600 on. It will be paid off by Feb of next year at the current monthly payment.

I have the ability to just pay the loan off now, via CC with 0% APR. I'd probably pay roughly half of that amount off to lower my CC debt right afterwards.

I know that by paying off my loan my scores will drop.

My current FICO scores are: EQ 686, TU 667, EX 698

I'd really like to get another car sooner, rather than later, but also want to make sure I am doing what is best for me financially as well.

Would I be better off keeping the current installment loan and trying for a 2nd loan, then paying off the first loan after securing the 2nd loan?

Does anyone have any insight or experience with something like this?

Also, my current credit card debt is pretty low. I pay most of my cards off in full every month. I do have a couple cards with around $1000-2000 balances that I am slowly paying down. One of those is care credit so I'm in no huge rush to pay it down.

Any thoughts or comments would be greatly appreciated.

[Anonymous]

If you're planning to get a new car soon, I'd just get the new car. If not, I'd refinance your existing car if it your old rate is horrible. It seems on the surface that you should be able to get a pretty good rate. I'd try DCU. 

We're in a similar boat. Existing loan on DH's car isn't at a bad rate, but the thought has been to refi it. But I've got this feeling that he won't end up keeping the car for THAT long and wonder if it's worth refinancing if we're not going to have it for years. In that way, I'll see what others suggest to you here. 

[Hoya08]

If you're current loan is set to be paid off 8-months, regardless of how "outrageous" your APR is, you're primarily making principal payments now.  Loans are interest loaded at the start of the payment period.

I'm not sure many banks will refi a $3,600 auto loan.  For example, NFCU calcualtor shows a minimum $5000 auto loan.  If you plan to refi, call the bank/CU first to find the minimum they'll refi.  You may need a personal loan instead; as long as the APR is substantially lower than your current one, you'll be ok.  You'll have to do the math to see if this is beneficial.

If I was in your situation, I would take the personal loan (or refi if possible) for 24 to 36 months.  Depending on how much your monthly payments are, this may lower your monthly payments enough to postively affect your debt-to-income (DTI) ratio for a 2nd auto loan application.  After securing the 2nd car, I'd get rid of the 1st car.

I'd steer away from paying it off with a 0% CC, then immediately paying 1/2 off, as the utilization ratio may negatively affect your credit score; depending on that CC's credit limit.

[Anonymous]

Thanks for the replies.

So I took my chances and applied for a second loan with my local CU and was approved for a new loan @ 2.49% today! I also applied with DCU and am awaiting the results. I'm extremely happy about the 2.49% and plan to go car shopping next weekend.