How to Structure my Debt for an Auto Loan

money_ball5 · ‎12-17-2023

I would like to purchase a used car under 20k and I have about 1/4 of that in cash. I have a 680 FICO with good history but high utilization. Should I use the cash for a down payment or use the cash to restructure my debt in hopes of getting a better loan? (the plan is the pay the car off within 1-2 years) Would it be smarter to take my cash and pay down or off one of my cards (all under 5k balance), apply for a credit card with 0% intro apr and balance transfer, or use all the cash for the car and hope I get approved for a semi-decent loan. Ideally I want a low loan payment because I will have the cash to pay off the car very soon, but dont want to get stuck with an additional $300+ bill in the meantime and debt consolidation is always a plus given I will be adding a new expense.

pizzadude · ‎12-18-2023

@money_ball5 wrote:
I would like to purchase a used car under 20k and I have about 1/4 of that in cash. I have a 680 FICO with good history but high utilization. Should I use the cash for a down payment or use the cash to restructure my debt in hopes of getting a better loan? (the plan is the pay the car off within 1-2 years) Would it be smarter to take my cash and pay down or off one of my cards (all under 5k balance), apply for a credit card with 0% intro apr and balance transfer, or use all the cash for the car and hope I get approved for a semi-decent loan. Ideally I want a low loan payment because I will have the cash to pay off the car very soon, but dont want to get stuck with an additional $300+ bill in the meantime and debt consolidation is always a plus given I will be adding a new expense.

I don't know that a bigger downpayment will necessarily result in you getting a significantly lower interest rate. What interest rates are you paying on your CCs now and what are the associated balances ?

March2010 FICO® ~ 695 TU, 653 EQ, 697 EX

youngandcreditwrthy · ‎12-22-2023

see what kinda loans you can get pre approved with without a hard pull on your credit first. you could always get an auto loan at like 5,6, 7% py on it for a year or two while you increase your credit limits and lower your utilization then open a balance transfer card, write yourself a check from it (BOA does blank checks for BTs) and then pay the car off faster with 0% and get the title in your hand a year or two early!

I paid off the last 20k on a BMWFS loan a few years ago with a BOA card balance transfer check and had the title in my hand 15 months early and paid 0% that last bit too! If youre utilization is 40% or less you could prolly still get a BT card now, but depending on what kinda car you want, if you dont have established higher lines of credit like 10k, 20k... that may be a futile effort. Also, i hope you are putting your cash in a good high interest savings account like Amex High Yield or Upgrade at 5.07%. There are some otehrs that are 4-5% too. If you get a car loan at 5,6,7% and you have your cash in a savings account making 5%, just pay your car loan from that and you basically break even and pay no interest. Good luck