When To Refinance!?!?!

[Anonymous]

So i just got a vehicle last night 1/26/2019. TU fico 8 was 767 and EQ was 737. I got the loan but not on the terms i was hoping for! Now i thought my scores were in the 620-640s. I have very limited history, have a current car loan with about 3500.00 left were paying off with taxes thats 11 months old. I have a capital one secured card from October 2018, fingerhut Novemeber 2018, and NFCU cash rewards Janaury 2019. The finance guy told me when he saw my score then saw my rate he was confused as to why and looked into my profile and saw it was so thin/early. I wanted to goto NFCU for my auto loan but was afraid of denial and needed a vehicle asap. Now my question is how long should i wait to refinance because im at a 20% rate and that is just insane!! The finance guy told me make some payments on this new loan and keep paying my credit cards and stuff on time and ill be able to refinance eventually and get a much better rate, so im just looking for some advice!! Thanks 

[ridgebackpilot]

You were "afraid of a denial" so you signed a loan with 20% APR interest?! If I were you, I'd be far more scared of that predatory interest rate (which will rob you blind) than a possible denial from NFCU or any other lender!

If your scores really are in the mid-700s, you should qualify for the best available interest rates on an auto loan, thin profile or not. But it sounds like there's some confusion about your scores. Have you pulled your latest CR from myFICO and checked your auto-enhanced scores? Most auto lenders pull them (not FICO 8) and you should know what they are before you ask for an auto loan. Lenders also will ask about your income and DTI, so make sure you know those ahead of time, too.

At least you're aware that you just made a big mistake and need to get out from under that predatory loan as soon as possible. I wouldn't waste any time seeking refinancing. But make sure this time you know your real FICO scores (including auto-enhanced scores) before you talk to any lenders!

[Anonymous]

I purchased Dec. 4th and refinanced with my local CU on Jan. 4th My first payment wasn't due till Jan 18th and I assume you have a good 30 days prior to your first payment. I managed to get a 4.75% APR with a 653 FICO 8 score so you should do much better.

I would start looking for a better APR today and try to get it refinanced before your 1st payment is due.

[Anonymous]

I was In a huge jam needed a vehicle ASAP or loose my job which then would lead to loosing house and keep on going. Only had 1000 down, my true Fico 8 auto scores from the credit pull were 767 and 737 but because of a thin profile they said the interest rate would be high no matter what. I’m curious what NFCU would do.

[ridgebackpilot]

---

@Anonymous wrote:
I was In a huge jam needed a vehicle ASAP or loose my job which then would lead to loosing house and keep on going. Only had 1000 down, my true Fico 8 auto scores from the credit pull were 767 and 737 but because of a thin profile they said the interest rate would be high no matter what. I’m curious what NFCU would do.

---

Just like romance, you should never allow yourself to be rushed into important credit decisions that have multi-year consequences!

Next time, go and rent a car from Enterprise for a week so that you can get to work. Or take Uber for a week. That will allow you to catch your breath and do your homework before visiting a dealership. I'll bet the finance manager loved the fact that you were in a huge jam, and it sounds like he took full advantage of that!

No problem, with your scores I'm sure you'll be able to refinance with NFCU or perhaps more likely your local credit union. No doubt they'll give you a far better rate than you got at the dealership.

[Anonymous]

If the vehicle is new and you did not put much down it will depreciate much faster than you think.

Look at an amortization schedule download one or use one online and it will show for each payment how much is towards principal and how much is towards interest.  You pay the most interest at the begining of the loan and the least at the end.

With a high interest rate you may not be able to refinance the car for years as the refinanced loan can't exceed 120% of the NADA retail value

So if you put little down or rolled negative equity, included taxes, fees etc in the loan you will have a hard time refinancing without putting more money down.

Let's say the car you bought you paid $18,000 

That's roughly $1,260 in tax now $19,200 add in motor vehicle fees, doc fees let's call it $20K Even and that's without GAP Insurance which is a MUST HAVE if you will have negative equity in the car.

So now you financed $20,000 over 5 years with 20% interest.

Payment is $529.88 a month for 5 years.

After 1 year you still owe  $17,412.77.   The car now 1 year old and 12,000 miles later certainly depreciated a lot more than $587.23.

After 2 years it's better you owe $8,156.  That seems more likley that you will be able to refinance then.

If you want to refinance sooner you may have to come up with some cash to pay down the loan.

[Anonymous]

A thin profile can absolutely prevent you from getting a loan at a decent rate but you may have done much better witha credit union.  That's OK I understand your dilemna and you were scared and needed a car.

You can refinance anytime your balance is less than 120% of the car's NADA retail value depending on Credit Union.

Try Capital One Auto Navigator - it's free and they will give you your rates without a hard pull.

if you can get it down even to 7% you will save over $65 a month for every $10,000 borrowed.

[dabrian]

Today with that rate.

[Anonymous]

What vehicle did you unfortunately purchase? I don't care how thin your file is, with those scores your rate should be in the single digits. In 2002, I had a very thin file and scores similar to yours and was able to get 4.9 on a new Honda Civic. Last year I financed a Corolla at 13.4 with 535 score.
Hopefully for your sake this is a spot deal and the dealer makes you return the car. Any way to undo the deal?

[Anonymous]

What vehicle did you unfortunately purchase? I don't care how thin your file is, with those scores your rate should be in the single digits. In 2002, I had a very thin file and scores similar to yours and was able to get 4.9 on a new Honda Civic. Last year I financed a Corolla at 13.4 with 535 score.
Hopefully for your sake this is a spot deal and the dealer makes you return the car. Any way to undo the deal?