Question on car loan? Refinance or just bite the bullet?

[Anonymous]

My wife and I purchased a used car back in August 2016. When we originally purchased we added a service contract. The total loan was $10676 for 48 months. Our payments come out to $246.

Shortly after the loan went through we decided agaist the service contract because the value was horrible because I drive 90 miles to work a day and would blow through the milage allowance. This dropped the loan amount significantly, but since the loan amount was never changed we had to keep our original monthly payment.

Currently there is a remaining balance of $5,514.72 and the interest rate is 5.29%. I currently pay $65 a week from my paycheck to cover the payments. I calculate that I will be done paying in 24 months. Well ahead of the 48 month loan length.

I have been thinking for a while about refinancing, but my only hold up is the age of the car. It is a 2008 VW EOS. I don't know if it would be worth refinancing a 2008 for 48 months. By the time the car was completley paid off it would be 12 years old. 

The benefit for paying off though is we would be able to apply the difference between the current payment and the future payment to our current CC debt or to put into savings for a home purchase we want to make in the next year. Either way I figure it would be roughly a difference of $125. That amount would be able to help significantly pay down CC debt or through into savings.

As I am just starting my real work to build my credit and get a home loan, I want to know various ideas about this situation. 

Thanks

[p-]

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travis2209 wrote:...Currently there is a remaining balance of $5,514.72 and the interest rate is 5.29%. I currently pay $65 a week from my paycheck to cover the payments.

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That likely depends on how low of a rate you can get.  Using this Amortization Calculator you have 89 weekly payments remaining, or 1.71 years, during which time you will pay 256.04 in interest.  By comparison, if you qualified for penfed's lowest refi rate of 1.49 (which you won't due to the vehicle age) you would pay it off three weeks sooner, with only 86 payments, and save 186.78 in interest.

On the other hand, if you can scrape up another ten bucks a week and pay 75, you'll pay it off about ten weeks earlier, saving about thirty bucks in interest.

I would skip the refi effort and focus on early repayment.

Good luck!

[Anonymous]

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@p- wrote:

That likely depends on how low of a rate you can get.  Using this Amortization Calculator you have 89 weekly payments remaining, or 1.71 years, during which time you will pay 256.04 in interest.  By comparison, if you qualified for penfed's lowest refi rate of 1.49 (which you won't due to the vehicle age) you would pay it off three weeks sooner, with only 86 payments, and save 186.78 in interest.

On the other hand, if you can scrape up another ten bucks a week and pay 75, you'll pay it off about ten weeks earlier, saving about thirty bucks in interest.

I would skip the refi effort and focus on early repayment.

Good luck!

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I guess my main question is about priority. If I had to list my priority in conerns to my credit/debt issues it would be:

1. Get my UTI below 30% on all sources.

2. Save money for a home down payment.

3. Payoff car.

I get the benefit to paying off the car. But if eliminating my car loan is low on my priorities, isn't there potential value to refinancing for a lower monthly payment and then putting the difference in my CCs to drive down the UTI or save for a home? Also, having a lower payment would lower my DTI come time to apply for a home loan? Yes?

[Anonymous]

Yes, you could lower your DTI calculation by refinancing into a smaller payment. But it may not be worth it because you'll be taking a HP or two to obtain financing. Then they'll close the old loan and open a new one - the new loan reporting will be reporting at 100% balance remaining versus the 50% or so on your current loan. That'll hit your scores. Then who knows how long before your current lender reports your loan closed and the refi lender as opened, you could have overlap and it'll look like two loans are open at once.

HOWEVER, given your post over on the mortgage board and post on the CC board and now here, you're going to get advice based on that question, not as a whole picture. If your goal is to get a mortgage, you need to look at your file as a whole like a lender will. I'd recommend pulling your mortgage scores from here and taking them to a mortgage broker. Sit down and have a conversation with them and see what they recommend based on your profile. If you have your scores, they can give you info without pulling them, if they want to pull say no thank you, I'm not ready for that and move onto the next person that will work with you.

[p-]

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travis2209 wrote:....my priority in cocerns to my credit/debt issues it would be:

1. Get my UTIL below 30% on all sources.

2. Save money for a home down payment.

3. Payoff car.

I get the benefit to paying off the car. But if eliminating my car loan is low on my priorities, isn't there potential value to refinancing for a lower monthly payment and then putting the difference in my CCs to drive down the UTI or save for a home? Also, having a lower payment would lower my DTI come time to apply for a home loan? Yes?

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There is not enough information here to make a decision.  Your priority should be paying those cards down to nothing, not below 30%.  Mainly because a home loan DTI calculation includes the credit card payments.  

In order to analyze this properly, you need to lay it all out on a spreadsheet; balances, rates, minimum payments, etc.  But beyond that, I'm not sure you have calculated your payment savings right if you refi.  Your payment is only 247, right?  How much are you paying to everything else?  What does your total budget look like?

I have to be honest, with your cards at such a high utilization, the year of the car, and your scores, I don't see you qualifying for a much better rate.  If I were in your shoes, I'd be more concerned with spending paterns and budgeting.  Servicing that credit card debt has to be killing your budget, and your sanity, not to mention your credit.  You might be better off tring to find ways to cut spending in your budget.  Good old beans and rice, and get rid of anything you can like cable TV or big data cell packages.  Buckle down in budget hell for half a year or so and see how you look when you come out the other side.

[Anonymous]

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p- wrote: I have to be honest, with your cards at such a high utilization, the year of the car, and your scores, I don't see you qualifying for a much better rate.  If I were in your shoes, I'd be more concerned with spending paterns and budgeting.  Servicing that credit card debt has to be killing your budget, and your sanity, not to mention your credit.  You might be better off tring to find ways to cut spending in your budget.  Good old beans and rice, and get rid of anything you can like cable TV or big data cell packages.  Buckle down in budget hell for half a year or so and see how you look when you come out the other side.

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I wish I had found this form back in December so I could have gotten help back then. At the time my wife and I transferred outstanding balances to 0% Transfer cards. That is why the Chase is so high. Most of last year I was a struggling poor college student that enjoyed living way beyond my means. Hence why my balances are/were so high. Before December my outstanding credit balance was well over $7K. My credit was in the gutter. Since December I have made a concerted effort to pay down the cards, that is why I only really have a balance on the Chase. Any of the other debt is petty and can be paid off in one paycheck. 

I personally don't feel my question is as related to budget as you may thing, but I definitely get what you are saying about getting a better rate than I have. I was just thinking in terms of monthly payments amounts and not the rate %. But after thinking, I feel it is best to leave my auto loan where it is and not worry about refinancing it and just find somewhere in the budget to through more money at the Chase card.