want PenFed refi but have many questions

[Anonymous]

Very first post (been lurking a little while) so be gentle with me....   

I want to apply to PenFed to refi my autoloan (currently 6.9% w USAA since 4/07 - orig $18k, now $12k). I'm not a PenFed member yet & would have to join via NMFA route - unless I can figure out how to leverage my Red Cross blood donations into a free membership.  I don't want to apply if I dont have a shot so I want to be sure I understand a few things first.

I pulled all my credit reports over the weekend.  I read here that PenFed pulls EQ.  I haven't got my actual score, just the report, only prob I see is high usage on ccards.  No late pays, 23+yrs history, 14.5yrs AAoA

Here are my many questions:

• Score:        What is the cheapest way to pull my EQ FICO?
• Utilization:   My ccard utilization is a terrible 39%.  Do they also include my installment usage?  If so, including my auto loan, EQ shows me at an even worse 45%.

• Inquiries:     car loan inq in 04/07 and car rental in 07/08 (grrrr - didn't know this would be an inquiry).  Want to keep inquiries limited - does PenFed do an inquiry for opening $5 share account? If so, should I open acct & apply for car loan at same time?

• Income:  I'm self-employed, my taxable income is low.  I've heard some applicants are asked for proof of income and some are not.  Does FICO seem to be the determining factor?

I'm sure I'll come up with more questions but this is a healthy start!  Thanks for sharing your knowledge.  This board is a wealth of information.  A~

[Anonymous]

thye will probably do an inquiry for an account.

Pull the score here is the best way.

Utilization is not horrible.  It is hurting your score some, but getting it under 30% will help (under 9% will help even more)

Income proof will probably be required, especially on a new account with them.  A high FICO and down payment may overlook this, but int his market and with you being a new customer to them you will need to show income.

[Anonymous]

You aren't in a bad place at all....the last time i checked it was 4.75%  you can go on Penfed and see what their current % to value is (for the most part they go to 105%)

I plan on going to them in a couple of months because their rates are awesome! 

[Anonymous]

Kinda a dumb question(or three), but what interest rate are you shooting for on the refi? What are you trying to accomplish? Are you going to extend the term as well?

Assuming you can drop from 6.9% to a 3.9% on the remaining 12,000 you are looking at maybe a 16.00 a month savings if you actually get the 3.9.

Being Self employed you will be required to show 1-2 years proof of income.

And that will also possibly penalise you in regards to getting the best possible rate they do offer.

If you happened to buy an 06 in 2007 you will be trying to refi a 3-4 model year old used car which may not give you the best rate 

Assuming $5.00 a month on 36 months for each interest rate point you drop you are shooting at a best possible savings of $540 to switch if you get the 3.9, not counting the $20.00 it costs to start your Penfed membership.

At a 4.9% rate you are at a whopping 340 in savings over the 36 month refi. is that worth the effort?

Message Edited by usmc58555 on 02-18-2009 10:48 PM

[Anonymous]

not a dumb question usmc58555 - I appreciate that you're running the numbers.

PenFed has a rate of 3.99% - even on a refi and even if it's an '04. 

I already called and asked about my car and even though I only owe 12+k, they would give me 16+k. Crazy, eh?  It's a refi where you could take cash out.  

So, 2 results -

I refi what I currently owe and drop my payments from $355 to $230    or  

I refi for the full amount they'll give me, still drop my payment down to $305 and plop the extra $4k on a higher rate credit card.   

DTI - both ways, I lower my monthly payment and have a better DTI ratio, right?

AAoA - downside is new car loan so my AAoA takes a hit

Utilization -  taking cash out and paying down a ccard is just tranferring debt but is there a difference credit wise on a high utilization car loan vs a high utilization ccard?

I have sooooo much to learn.

[Anonymous]

Stop!!

to get 12,000 down to 220  at 3.9% you are taking the loan back to 60 months.which means you will be paying for 8 years on your car which will be 11 years old when done.

bad idea.

Taking the money out and paying credit cards off.

I do not recommed mixing your negative equity like that. At all.

Why? Simple now you will owe 16,000 on your car again. (lets not even address that temptation is too great and you charge your cards up again)

Cars have a finite life and a break even point where the cost of repairs are greater then the cost of buying new.

So lets say 4 years from now you decide you need a new car, you have to roll the negative from your credit card pay off into your new loan. just bad business, unless you financially need the free-ed up credit limits.

maybe I would extend to 4 years and cut 70 a month from your payment.

maybe.

You really need to look at the numbers of your "extension" and the total cost of both loans before you want to do anything.

Since cars by default are not investments, it is usually better to simply pay them off as soon as possible.

[Anonymous]

I completely understand what you're saying and I agree that it is madness to take cash out on a depreciating asset but....

First I want to establish if I can even do the refi with PenFed.  That's number one. I'm using this scenario to learn as much as I can. If I can qualify, it would drop my current 12k loan by 3% and that's good - especially since there is no cost to do the loan.  Might I qualify with my credit as it is - 39% util on ccards, plus does an installment loan factor in to utilization?  I don't want those original questions to get lost - I really want to learn this stuff.

After that, I will look at the smartest way to handle it.  I could refi and keep paying the amount I am now to be done with it sooner - I've saved money but I now my AAoA has gone down - is that worth it?   I could refi and lower my payments thus my DTI.  Is that worth it?  What is more important, DTI or AAoA?  I could be very foolish and pull extra cash, be upside down in the car but have access to that extra cash at 3.99% (a very foolish idea, but tempting since it would pay down a higher card.)  Basically, just transferring debt.  Financially, that's the dumbest idea since, as you say, I'll be paying off the car forever.  But how is that different from paying down the ccard forever?  And I get my DTI ratio down.    

Just trying to learn and look at alllll my options.  Thanks to all for taking the time to educate me more about credit!