@Revelate wrote:
@Anonymous wrote:
It's not possible with all lenders - each has their own rules on recasting loans. Some the minimum balance to recast is $3k or $5k, some don't recast at all, some require a lumpsum payment of at least 10% of remaining balance.....you just have to call around and ask the questions.
My car loan is with a local credit union - they tend to have the most lax rules when it comes to recasting. Mine just requires a minimum remaining balance of $1k and lump sum payment of at least $1k to recast. So say my balance was $1980, I wouldn't be able to recast the loan, because the balance would be too low to meat their 2 requirements.
That is interesting; how does it report with the bureaus post-recasting?
Refinance would be a new tradeilne typically with most lenders, from your description this is different but the devil is in the details on the report.
I'm not sure what this gets other than for the lenders who refuse to extend more than a X number of payments ahead, though I suppose it is easier to have $15/month on autopayment or whatever rather than reminding oneself through phone alerts every six months or whatever to pay a buck or two as many lenders push the payment date way out into the future from reports here anyway.
Edit: yeah might make an impact on some mortgage apps these days as some lenders certainly aren't excluding installment loans with minimal payments left if you wanted to keep the original tradeline rather than just sorting with a small secured loan.
Appreciate the insight!
It doesn't change anything with bureau reporting except you have a lower payment. Your original loan date, original balance, etc... all stays the same. This allows you to keep the same tradeline, but get a lower payment. This is most impactful for someone who is looking to get a mortgage and wants a lower DTI based on reported minimum payments. Beyond that, I don't see much advantage to recasting v paying ahead.
It may also be helpful for someone trying to get out of debt and increasing cashflow to pay down more debt, but not wanting to close tradelines so they can preserve their score.
I have a private student loan, that automatically recasts every year on it's anniversary - but they will do it mid-year for a lump sum payment of $5k or more. My mortgage will allow me to recast with paying 10% of remaining balance or $5k in a lump sum (which ever is greater - so will be tricky once close to $50k remaining balance). Some big banks require 20%, or a set amount around $15k, some credit unions will do it with payment of 5% of remaining balance.
Part of my financial planning is to continually reduce my minimum payments by lump sum payments and recasting loans - just so that my payments are as low as possible in the event something happens, like injured and can't work, loss of job, etc... It's usually in unexpected emergencies that DTI becomes most important, and is the most dificult thing to fix in an emergency when you actually need a loan.
In 2 years I'll have my mortgage and student loans payed down enough that with recasting my student loan payments will be around $25/mo combined, mortgage around $200/mo and my car payment is around $15/mo. If I were to find myself unemployed, with payments that low, I could get the money to make them by donating plasma each month and still have enough money left over to fill up the tank in my car with gas. The security and peace of mind that comes with that is the main reason I do it.
