How soon can I refinance?

Anonymous · ‎06-16-2019

I just bought a 2018 Chevy sonic and my APR IS 17% my credit isn't horrible. It in the mid 600s. I have 30 hard inquires and 20 should Fall off by December. If I wait til January 2020 would it be too early to refinance. I havent missed a payment on anything in 2 years. I feel like I got scammed with this credit score knowing there are people with worse scores that have lower interest than u do.

Fico82 · ‎06-16-2019

I had my mom refinance 2 days after we signed at the dealer. Sometimes the sooner the better depending on your situation. In her case we took all the rebates about 10k but in turn they gave her a high interest rate of 8% Saturday night. Monday morning we refinance at 2% at local credit union. Once you see your scores improve definently shop around.

Anonymous · ‎06-17-2019

The problem you will likely face is loan to value. Lenders will typically lend up to 110-120% LTV.

Cars depreciate quickly and looking at an amortization schedule assuming you financed 18K at 17% for 5 yeas. After 6 months of payments you would still owe $16,804 after 1 year $15,503 and that may exceed the loan to value threshold banks and credit unions will offer.

I got very lucky and just refinanced my Audi and was about $1,400 over the max loan to value. Since I applied for a Visa with that credit union at the same time they increased the visa limit by $2,500 and took the $1,400 from there since it's 0% for 6 months and then 10% that wasn't a bad choice.

Also double check and make sure there is no pre-payment penalty on your current auto loan. I didn't think anyone did that but recently read on the forum about that making a comeback.

You can also refinance twice, I once took a loan from 17% to 10% to 4.99% and the lower the interest the quicker you will be right side up on the loan, so even if not a super awesome rate if you can pull off <10% today and squeak by under the LTV threshold it may very well be worth doing.

Now if my assumptions are wrong and maybe you put a lot down on the car and you loan is less than 18K you may not have a problem at all with LTV.

As far as your inquiries 1) if they are > 1 year they really don't count except possibly in a manual review and 2) some might be grouped like if multiple auto inquiries in a relatively short period of time so the impact may not be as bad as you think.

My advice is to start playing with an amortization schedule and be aware of your loan to value. They may get their values from a NADA or other site. DCU uses NADA and will go to 120%. If applying with a credit union typically 1 credit pull is good for all apps for 30 days or so, maybe app for a credit card with them at the same time.

Ultimately when your LTV is within 110-120% of NADA you should be able to refinance and if that's today you might be able to get approved at DCU. They pull Equifax Mortgage score so know what that is before applying.

Good luck and keep us posted.

Kforce · ‎06-17-2019

@Anonymous wrote:
The problem you will likely face is loan to value. Lenders will typically lend up to 110-120% LTV.
Cars depreciate quickly and looking at an amortization schedule assuming you financed 18K at 17% for 5 yeas. After 6 months of payments you would still owe $16,804 after 1 year $15,503 and that may exceed the loan to value threshold banks and credit unions will offer.

+ 1

~18k @ 17% would require about 525-550/month payments to keep even with depreciation.

If you took a > 5 year loan, you would be wise to pay extra each payment for the first year or two.

If you can pay around 550/mo you should not get up-side down and be in a position to refinance when scores and profile allow. If you pay a minimum payment on 7 year loan you will become upside down after 6-7 months. This will make it hard to refinance