refinance CPS auto loan

[Anonymous]

Hi everyone! I actually have posted before, its just been months. I have a question for you auto-loan experts! lol

Ok so 3 years ago we financed a car for a very high interest rate. I think its 21%. Pretty bad huh? Well honestly, it really helped us in the long run because it was the only way we (by we I mean my husbands credit, mine really really really sucks lol) was able to rebuild credit and get financing for a second car and our home now So its a l.10ove/hate relationship with the darned thing. However what we would like to do is get rid of the ridiculously high payment. Its 455.01 a month! the principle on the loan is $11,053.  The new car we got in June is around the same now.

Even if we lower the payment by 100 it would be like heaven!

So... we got the second car financed through a local credit union. Should we ask them to refinance it and maybe roll it in with the new car? Or should we just go around applying for refinance? Neither of us have refinanced anything before so we dont how it works. Current score is at 634 with TU. Our auto score is higher than that, we know cause it was higher in June when the TU score was waaaay lower than that. (make sense??) Anywho...

If anyone needs more info to answer the question please let me know!! Thanks too!

[Anonymous]

Oh I wanted to add, that I am starting to get the itch for a newer car.... should we maybe see if we can trade it in? It is an upside down loan unfortunately.   I think its trade in value is at 5k maybe 6k more sadness....lol

[Anonymous]

There is not a lot of sadness here.

You need to think of the positives: this loan allowed you to rebuild your credit and do other things with your life. If it was not for it you would not be where you are today.

That being said and hindsite being 20/20, if you had made more then minimum payments, and/or bi monthly to help cut your interest charged you would be better off. But hindsite is 20/20 and you may not have been in that cash friendly circumstance.

The biggest factor on if you can re-finance is if the amount the car is "worth" is within the realm of the amount you need to finance.

Since your interest rate is so High, and you probably have not made the extra payments, you would probably need to come up with the difference to refinance. Your car is worth far less then you need to get a re-finance.

So in reality here are your options:

1- Come up with the difference in worth and owed to get the car refinanced.

2- Keep making accelerate payments on your current car, Ramen noodle your lifestyle and scrape every penny to either pay it down or pay it off. Keep this up until you get the car paid off. Then keep the car and start saving money for a new one. Assuming your car is in good condiion and runs well I would think this option is highly viable.

3- You can, assuming you selectively choose your purchase, find a new car with rebates and incentives to suck up the underwater aspect of you current loan and trade you current car in for a new one at hopefully a better interest rate and for one that is fully warrantied. You could see some type of payment drop, but I have no idea how much, you would also want to put down a Downpayment to help sop up the negative equity as well. And BTW: income tax refunds are happening which should help. You could actually go into a new car at a low interest rate and see savings over your current car with high interest rate.

Now if you do do number three, understand that you are still in a negative equity situation, but you are trading out of a high interest, expired warranty car for a low interest warrantied vehicle so- you are going into a better circumstance, just not the best.

You need of course to do your math,and you may find yourself shopping by rebates and incentives and therefore not getting the exact car you want.

(I also have no idea what you drive or how much the difference is between what your car is worth and what you owe, but...I have seen people who drive very little lease, roll the negative and at the end of lease term they are free and clear.)

BUT WITH ALL THIS:

A NEW CAR ITCH IS NOT GROUNDS TO GET A NEW CAR. That is not a sound financial decision.

Thats what got you into a bad credit circumstance in the first place. 

If you can show a valid reason beyond something like a want, but show somthing that saves you money or helps pay the debt off or puts you in a better place that is the only justification for a new car.

[Tazman81]

+1 -- great advice usmc.....

you all can check with your credit union and see if they will refinance your second vehicle for you, but like usmc said, a lot of the times the cu/banks only want to finance what the vehicle is currently worth, but it is still worth a shot.

[Anonymous]

Thanks soooo much! That is GREAT advice.

Here is what I came up with:

I can trade the current car for 5k. loan is at 11k still. Eat the difference. Buy a car for around 16k. Already got approved with Capital One blank check deal for up to 24k, but I am not even about to do that! lol The reasons for me really wanting a new car is somewhat practical. Its going to need new brakes, tires, shocks, struts etc very very soon. We live in Iowa and it handles the snow HORRIBLY. I have always hated driving that car in the winter. plus every 6 six months we value the car at various websites (kelly, edmunds, etc) and it keeps going down down down. So I want to get rid of it before we are ridiculously underwater.

The car I have kinda thought of is a 2008 Honda Accord for $15,994. 52k mi. My husbands mother has one and so I know it handles snow very well! the reliability and safety ratings are amazing so with 2 kids, thats really great. Our overall payment will drop $200 - $150 a month and interest rate will be closer to 4%. So it sounds like a good deal to me...

If anyone knows anything about the cap1 blank check let me know, like if we need to be careful of anything or try for other financing etc.

In your honest opinion, are these good enough reasons?? Be as brutal as you can! hah

[Tazman81]

How much is the interest rate on the blank check with capital one that you were approved for?

Now, when you say you may have to eat the negative equity, do you mean roll it into your new loan, or do you have enough cash in the bank saved to pay off the negative equity in the vehicle?

The reason I ask this is because though you have a blank check that you can use "up to 24k", I am pretty sure that Capital One has a stipulation that the amount of the check cannot be more than 125% the value of the vehicle. (At least I think it's 125%, but you would need to check your paperwork to see what the actual percentage is).

[Anonymous]

Well I got the blank check in the mail today...

the Loan to value is 110% sooo....

I checked out the other message in the forum and clicked a link for an auto-loan calculator. I have been worried sick about this negative equity and was worried we would pay on the car for the rest of our lives! hahah Anywho, I put in what would happen if we paid an extra $100 every month. And it said AUGUST 2011 would be pay off month!!!!! I almost poo'd myself hahah. Well, but what I dont get is this: even if we paid $580 straight to principle every month (imagining we arent paying any interest) it only comes out to $4640. soooo I dont really get it...

I'll give you guys the stats of the loan see if maybe on of the pro's can figure it out for us

May 3, 2007 is start date of loan

original loan amount is $18,749

interest rate is 21%

our current payment is $455.01/mt

says principle amount is: $11,053

payoff amount is: $11,162.03

I am really really really really not any good at math so I dont understand how that auto loan calculator is right...

It was at http://www.bankrate.com/brm/auto-loan-calculator.asp

[Anonymous]

here are the other stats for the capone check:

2010 or newer models: 10.95%

2008-2007 models: 13.64%

2006-2004 models: 14.89%

approved for $24k but we would never spend that kind of money on a car, and I am not interested in a brand new spankin car, been there, done that. Now I have a car that is upside down and is in need of repairs and out of warranty. ugh....

I really really really dont like the idea of paying 21% on that neg equity... thats what irritates me most about it, I suppose.

[Anonymous]

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@Anonymous wrote:

here are the other stats for the capone check:

2010 or newer models: 10.95%

2008-2007 models: 13.64%

2006-2004 models: 14.89%

approved for $24k but we would never spend that kind of money on a car, and I am not interested in a brand new spankin car, been there, done that. Now I have a car that is upside down and is in need of repairs and out of warranty. ugh....

I really really really dont like the idea of paying 21% on that neg equity... thats what irritates me most about it, I suppose.

---

The negative equity was a factor of the transaction. had you paid more per month then the minimum you owuld have had less of it. Neg Equity is the natural evolution of the loan you needed kinda like well, the eventual outcome of the food you eat.

I think your best outcome would be to Ramen noodle your lifestyle and pay your current car off ASAP.

Then you can buy what you want when you want it

[Anonymous]

I am in some what the same situation I have a little more equity I owe 10300 cars worth is close to 9000 how does refinancing affect your credit.