Question about refinancing an auto loan

bkRebound · ‎02-29-2016

Ok ive been wondering for quite some time now about refinancing an auto loan. I have 3 years left on a 4 year loan my current auto loan is 18% on a 12,000 loan. I have paid off 20% of the loan so I am recieving some credit from the loan. If I refinance the loan will it lowwer credit score short term being that the new loan would be at 100% owed instede of 80% owed. I do under stand that I would save a fair ammount of money by refinancing my loan so I know its worth it after I buy a home to do this. I was just wondering about the credit score. Would alot of the points loss be made up by paying off the first loan threw the refinance or would it just report transfered loan so it would not help at all?

EAJuggalo · ‎02-29-2016

I believe you would lose a few points in the short term by having the high UTIL% on the loan but would gain a couple points for having the paid off loan in your report. If you're planning on a mortgage in the next few months I'd probably wait, any longer than that and the money difference would make up for it, plus a lower DTI since you should have a smaller payment.

EX700 TU 704 EQ 694 4/03/22
Cap1 QS-$4,500 Chase Freedom Flex- $800 Chase Freedom Unlimited- $1,000 Victoria's Secret- $1,200 Citi DC- $800 Amazon Store Card- $3,500 AMEX Hilton Honors-$1,000 Discover It-$1,000 Wal-Mart MC $290 Chase Sapphire Preferred-$5,000 NFCU Flagship $13,800 AMEX BCE-$1,000 AMEX Gold-$5,000 AMEX Delta Blue $1,000 Lowe's $5,000 Navy Platinum $17,000 AMEX BBP $2,000

Appleman · ‎02-29-2016

A great point, what is the goal of your credit portfolio in the next year? Pay off debt, improve your score buy a house?

As EAJuggalo pointed out you are likely to see a small hit for the new auto secured loan and the high initial utilization.

If you can knock that interest rate down by 5, 10 maybe 14% you could see a lower payment ot shorter term, saving you money.

Good luck

SouthJamaica · ‎02-29-2016

@bkRebound wrote:
Ok ive been wondering for quite some time now about refinancing an auto loan. I have 3 years left on a 4 year loan my current auto loan is 18% on a 12,000 loan. I have paid off 20% of the loan so I am recieving some credit from the loan. If I refinance the loan will it lowwer credit score short term being that the new loan would be at 100% owed instede of 80% owed. I do under stand that I would save a fair ammount of money by refinancing my loan so I know its worth it after I buy a home to do this. I was just wondering about the credit score. Would alot of the points loss be made up by paying off the first loan threw the refinance or would it just report transfered loan so it would not help at all?

Yes you'll lose some points in the near term, but it's absolutely worth it to save the huge amount of money you will be saving. Do it.

You might be able to offset the point loss by opening an Alliant Credit Union savings account, taking out a $500 share secured loan with 48 month or 60 month term, decline auto pay, then pay off more than $400 on the loan; then you'll have a mostly paid down instalment loan on your record. There's no hard pull, and the interest is almost nonexistent.