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Thread: Refinance car loan

  1. #1

    Default Refinance car loan

    Girlfriend had some bad credit after her divorce, has a car loan with a 9.9% interest rate. Her credit is better now and wants to refinance. She bought the car new from a dealer and the loan was set up by the dealer through a bank. She likes the car and has no intention of trading it in and she owes way more than it's worth anyway. Any insight into how to refinance to get a lower interest rate? I'm not familiar with the process.
    "Men never do evil so completely and cheerfully as when they do it from religious conviction" - Blaise Pascal

  2. #2
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    the tough part is probably the "way more than it's worth". if she has a banking relationship with an institution, she should see about the possibility of taking out a line of credit or a new loan at current rates that would pay out the old loan and reduce her costs. the existing lender isn't likely to be interested in just taking a lower rate although you might try and renegotiate with them starting with "if you aren't prepared to negotiate a better rate, we'll just pay out the loan and you'll get nothing going forward". before you do either of those things however, she should start by making sure she has the right to prepay the loan without additional penalties or at least finding out what those penalties would be. unfortunately, those may add to more than might be saved by a lower rate.
    "If you did not want much, there was plenty." Harper Lee

  3. #3

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    Good places to start, thanks Ken.
    "Men never do evil so completely and cheerfully as when they do it from religious conviction" - Blaise Pascal

  4. #4

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    +1 on line of credit at her bank (assuming the auto loan is elsewhere). They will ask what it is for. Assuming her credit is now good enough, she'll qualify for a better rate than 9.9%. Probably 5-6%? Still decent relative to the higher one. Just depends if it will cover the full amount of the other loan or not.

  5. #5

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    I don't know if she would qualify for a line of credit big enough, but we'll definitely look at this option.
    "Men never do evil so completely and cheerfully as when they do it from religious conviction" - Blaise Pascal

  6. #6

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    Quote Originally Posted by Chmilz View Post
    I don't know if she would qualify for a line of credit big enough, but we'll definitely look at this option.
    Generally speaking, with auto loans, if you don't pay the total amount off, you still have to make the remaining payments at the original amount that was agreed to. They won't reduce the amount being paid, even though the amount owed is less. So while you would end up paying less in the long term, the initial double payment can be tough for some people.

  7. #7

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    Doesn't look like she can get a line of credit, so we're on to other options.
    "Men never do evil so completely and cheerfully as when they do it from religious conviction" - Blaise Pascal

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