Refi Question

[Anonymous]

So I would like to refinance my current loan. I was desperate and needed a car because mine broke down and it was going to cost more to fix it then it was worth. I was not in a good place credit wise (very low 500's) but have a good income (3800 month) and very little other debt (this was prior to working on rebuilding my credit). I took a deal with 21% interest and my mom (who doesn't have very good credit either) co-signed for me to show more income. This was in February of this year.

I have since raised my score to 599 (checked with CCT today) and have started to pay off old collections (1 down 7 more to go!!). I would like to look into refinancing in my own name and hopefully lower my payments and interest some. I called today and checked the payoff of my loan and it is around $19,000. And I have a 2015 Chevy Captivia, I like my car and don't want to trade it in. So any ideas on where to start looking or should I hold off for a little longer for my score to improve some more?  The dealership that I had gone to said that I could come back after 6 months and they would help me but I am not sure that I want to go back to that place (almost 70 miles from where I live).

Any information is helpful. Thanks in advance

[Anonymous]

Congrats on your progess so far!

You do not need a dealer's help to refinance an existing car loan.

Your scores probably need to improve another 50 points or so before you will see any serious difference in your interest rates (and lower interest rates = lower payments).

Meanwhile, it would be a good idea to make a couple of extra principal payments, if you can afford to do so.  These payments will reduce your principal, which reduces the total you need to refinance.  Most of your payments (well over half of each month's payment) at this point are going to interest on the loan, and your principal is not decreasing by muich, if at all, yet.  If you can sink a couple grand into your principal, you will lower your payoff amount and your refi loan needs.

When you're ready to start the refi shopping, take a look at a local credit union - if you're already a member of one, that's the best place to start, but even if not you can usually join one in your area just because you live there - or a nationwide credit union.  There are a lot of people about to suggest you head straight to NFCU or PenFed, and those are not bad options, but they don't work for everyone so do your research first.  (Personally, I looked at them but declined to use them for anything after locating better options in my home state.)   In addition to credit unions, many banks also do refi loans - Capital One is known to be friendly to folks with less-than-perfect histories/scores.

None of this requires the input or assistance of a dealer.

I'd expect a dealer to try to "help" you roll the negative equity on your current car into another one.  You don't want to do this, for many reasons, but especially if you like your car.

[Anonymous]

Awesome! Thank you!

I am a member of PenFed (just a savings account so far) and a local CU. I might be able to make a couple extra payments over the next few months to bring down the principal a little and hopefully that will help. And then try to go that route.

 I have already budgeted $500 a month for a payment, so if I could get my payment lowered a little bit then I can still pay the $500 so that it will go down faster.

[StartingOver10]

^^^All of hmw_75's post is excellent advice.

One of the most important parts of his post is this: 

None of this requires the input or assistance of a dealer.

I'd expect a dealer to try to "help" you roll the negative equity on your current car into another one.  You don't want to do this, for many reasons, but especially if you like your car.

As a general rule keep your financing and refinancing separate from the purchase and you will be in much better shape financially. To refinance, it is never appropriate to go to the dealership. Those sales reps that claim 'come back in X months and we will help you' are not doing you any favors whatsoever. In fact, it is one of the very serious red flags that you are about to pay top dollar and receive a very high rate.

There may be times that it is unavoidable to get the high rate and pay more than the market price.  But now that you are here and working on your credit, you don't need to go down this road again.

Follow the advice above:

• keep working on your credit - visit the rebuilding section here for specific help 
• keep making your payment on time, every time. 
• pay down your principal balance with either extra amounts added to your current payment or extra payments
• when you get to a goal of mid 600's then look to your CU to refinance.

You can do this!