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Let me explain my situation.
About a year and a half ago, I was able to finance my first vehicle through Carmax. A 2011 Honda Fit. After downpayment my loan was about $8500. Interest is 7.95%. The loan is directly from Carmax. Two weeks after I made the purchase, I was rear ended on the way home from work and my car was totaled. We both had insurance and the guys insurance paid for what the vehicle was worth (About $6000). The problem was that I did NOT have GAP insurance, which would have covered the remainder of the loan. I decided to put $4000 into the loan and keep the remainder $2000 into my savings (I currently have about $850 left as of today). My roomate has been letting me borrow his car since so I can get to and from work.
Since then, I've been paying off the remainder of my car loan at $300 a month, and now I currently just have under $1400 left on the loan. The goal is to have it completly paid off by the end of this year, so I can finance a new vehicle. However, I was wondering if it is possible to add the remainder of what is left on my existing loan, so I could finance a new vehicle now? Would that be a good idea? How would it impact my score? I have a FICO score of 770 at the time of this post.
@Anonymous wrote:Let me explain my situation.
About a year and a half ago, I was able to finance my first vehicle through Carmax. A 2011 Honda Fit. After downpayment my loan was about $8500. Interest is 7.95%. The loan is directly from Carmax. Two weeks after I made the purchase, I was rear ended on the way home from work and my car was totaled. We both had insurance and the guys insurance paid for what the vehicle was worth (About $6000). The problem was that I did NOT have GAP insurance, which would have covered the remainder of the loan. I decided to put $4000 into the loan and keep the remainder $2000 into my savings (I currently have about $850 left as of today). My roomate has been letting me borrow his car since so I can get to and from work.
Since then, I've been paying off the remainder of my car loan at $300 a month, and now I currently just have under $1400 left on the loan. The goal is to have it completly paid off by the end of this year, so I can finance a new vehicle. However, I was wondering if it is possible to add the remainder of what is left on my existing loan, so I could finance a new vehicle now? Would that be a good idea? How would it impact my score? I have a FICO score of 770 at the time of this post.
1. I don't think there's any way to get the proceeds from the new loan to go towards anything but the new car.
2. From a scoring perspective, you are better off paying out the old loan at as slow a pace as the loan terms allow. Once it gets paid off, your FICO 8 scores will lose some points.