Refinancing the S
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Joined: Jan 2004
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From: NY
ok
here are the important numbers -
23286.40 = principle
8325.20 = interest over life of loan
after 1 year you have paid 6322 (12 pymts x 526/mth) of which most was interest
Here is an example of how refinancing will help - these number are just hypothetical but serve as example
Of the 6322 paid lets assume that 4300 of it was interest and 2000 went towards principle - therefore you would still owe 21286 if you decided to pay off the car today. You already know that you will pay another 4025 in interest (8325 - 4300 paid 1st yr) over the next 4 years at 12.75%. If you were you borrow 21286 right now for 48 months - if you were to get it at 6% you might only have a interest charge of 3000 over the next 48 months - a savings of 1025 -
I hope throwing all these numbers out doesn't cloud it up, but the net is: dont extend the duration and lower the interest rate and you will pay less overall.
here are the important numbers -
23286.40 = principle
8325.20 = interest over life of loan
after 1 year you have paid 6322 (12 pymts x 526/mth) of which most was interest
Here is an example of how refinancing will help - these number are just hypothetical but serve as example
Of the 6322 paid lets assume that 4300 of it was interest and 2000 went towards principle - therefore you would still owe 21286 if you decided to pay off the car today. You already know that you will pay another 4025 in interest (8325 - 4300 paid 1st yr) over the next 4 years at 12.75%. If you were you borrow 21286 right now for 48 months - if you were to get it at 6% you might only have a interest charge of 3000 over the next 48 months - a savings of 1025 -
I hope throwing all these numbers out doesn't cloud it up, but the net is: dont extend the duration and lower the interest rate and you will pay less overall.
Joined: Mar 2003
Posts: 3,962
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From: San Fernando Valley, CA
Originally posted by DaveOnLI
Try another lender. They might be adding in a large fee for refinancing and hoping you wont notice because they are extending the payments out another year.
It doesn't make sense to stay at 12% if you are worthy of a 6% rate.
Ask for numbers that reflect 48 months instead of 60 that way you can compare directly - how much will it cost me to finish the existing loan vs. a refinanced loan.
Try another lender. They might be adding in a large fee for refinancing and hoping you wont notice because they are extending the payments out another year.
It doesn't make sense to stay at 12% if you are worthy of a 6% rate.
Ask for numbers that reflect 48 months instead of 60 that way you can compare directly - how much will it cost me to finish the existing loan vs. a refinanced loan.
If you already paid off a year, why pay for that year again? Finance at 6% for 48 months. That way you are not extending yourself out for all that interest. It sounds like the finance guy is trying to hook you into the cheaper monthly payment. If you finance for 48 months now at 6%, you will still get cheaper payments and still come out ahead.
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Joined: Jan 2004
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From: NY
ok - thank you to ruexp67 for the link to the loan calculator!
here are real numbers:
you should currently have an outstanding principle balance of 19729 based on the fact that you have made 12 payments
if you borrow 19729 right now for 48 months at 6% interest you will pay a total of 2511 in interest vs. 5560 in interest you will pay if you continue at 12.75%
Good luck!
here are real numbers:
you should currently have an outstanding principle balance of 19729 based on the fact that you have made 12 payments
if you borrow 19729 right now for 48 months at 6% interest you will pay a total of 2511 in interest vs. 5560 in interest you will pay if you continue at 12.75%
Good luck!
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Joined: May 2004
Posts: 5,094
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From: Vienna, VA
those of you who say that MOST of the payments in the first year of interest are right
and WRONG
this is a CAR with a FIVE year loan, not a HOUSE with 30!
with his first payment of $526, $249.40 was interest, $277.28 principal. In the 12th month, $214.79 interest, $311.89 principal. Over the first 12 months, you've paid off $3531.37. by the way, the amount of the original loan was $23,200; if it was $24000 the bank ripped you off even MORE!
by all means refinance. 12.9% is a sucker deal and the bank is laughing all the way to the...bank. 6% is good for someone with your short history. DO IT. but don't go another 5 years, go FOUR. your payment will be around $460. if you do five years, $380.
I have a master's in finance and calculated it myself, not with a web-based loan calculator.
and WRONG
this is a CAR with a FIVE year loan, not a HOUSE with 30!
with his first payment of $526, $249.40 was interest, $277.28 principal. In the 12th month, $214.79 interest, $311.89 principal. Over the first 12 months, you've paid off $3531.37. by the way, the amount of the original loan was $23,200; if it was $24000 the bank ripped you off even MORE!
by all means refinance. 12.9% is a sucker deal and the bank is laughing all the way to the...bank. 6% is good for someone with your short history. DO IT. but don't go another 5 years, go FOUR. your payment will be around $460. if you do five years, $380.
I have a master's in finance and calculated it myself, not with a web-based loan calculator.
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From: Denver
I can see how it would make sense to refinance to go from a 12.9% interest rate to a 6% interest rate, but what if someone was going from a 6% rate to a 4% rate. Would that still make sense to refinance?
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From: NY
Originally posted by allkingz
I can see how it would make sense to refinance to go from a 12.9% interest rate to a 6% interest rate, but what if someone was going from a 6% rate to a 4% rate. Would that still make sense to refinance?
I can see how it would make sense to refinance to go from a 12.9% interest rate to a 6% interest rate, but what if someone was going from a 6% rate to a 4% rate. Would that still make sense to refinance?
Nope, never mind I'll just keep paying another 2%.
ANY time you can refinance to a lower rate makes sense UNLESS you are charged a refinance fee that is greater than then interest saved.
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Joined: May 2004
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From: Vienna, VA
Originally posted by allkingz
I can see how it would make sense to refinance to go from a 12.9% interest rate to a 6% interest rate, but what if someone was going from a 6% rate to a 4% rate. Would that still make sense to refinance?
I can see how it would make sense to refinance to go from a 12.9% interest rate to a 6% interest rate, but what if someone was going from a 6% rate to a 4% rate. Would that still make sense to refinance?
also, when you originally bought it, did the dealer say you only qualified for 12.75% or did you actually shop around. dealers often pull the "i tried for you but this is all i could get" crap and rip people off.