Effect of an Auto Refi - should I do it?

[Anonymous]

I started on my credit rebuild in March of this year (2017) when my scores were in the low 500's. My first loan was a car loan at 20.9% !! Still I was happy to get it and be on my way. Since then I've made good progress, gotten some good CCs open (Chase/Amex/CapOne) and scores are 670-700, but my average age is low of course, and my number of HPs is high (9 on EXP, 3 each on EQ and TU).

My future plans are possibly a new(er) car in the next 6 months (current car is 2005) and house mortgate in 1.5 to 2 years.

My question is should I refinance my current auto loan to lower that 20.9% rate? (I have 24 payments remaining) Or should I just make extra payments and pay it off faster to save some money there. 

My concerns with refinancing are:

another HP

another new acct (lowering average age of accts)

I feel like right now I'm on a good path to getting into solidly into low 700's over the next 6 months if I just continue what I'm doing and want to be careful about making any more changes. On the other hand I don't want to continue that high interest rate auto loan if I a refi will have minimal negative effect on my scores.

Thanks!

[Anonymous]

Do it if it saves you a lot of money for sure.  Also may lower DTI.

A new account hurts the most for 6 months.  Even with hitting AAoA, in 2 years when you want your mortgage, your AAoA will go up 2 years total.  In those two years, you can try to pay down as much of the auto loan as possible to get your installment utilization down which may help a little bit more.

[Appleman]

How much do you owe on the current car?

I do agree that if you can get the APR down you may save a lot of interest over the next 24 months.

$10,000 at 20.9% for 24 months is $2,321 in interest

$10,000 at 10% for 24 months is $1075 in interest

$10,000 at 5% for 24 months is $529 in interest

If you less than that you will see less in interest savings. And honestly if you are going to buy a newer car (trading in this one in?) in 6 months, I would continue to pay what I could to reduce the amount owed.

I would also get onto KBB or CarGurus or other site and see what your tradi in value of the current car MIGHT be as this can help you determine if you have positive or negative equity in your current car.

[dabrian]

Definitely refi if it saves you money. Inquiries are a very small part of what goes into your credit score equation.