Thread: upside down car loan refi ?

Right now, I have a 2003 Toyota Corolla S that I purchased NEW in April, 2002. I put $150 down and now I have a loan at 11.5% that I've paid for 1 year.

Based on Kelly Blue Book for 2002 model Corolla's, the value of the car is only about $14k. I STILL OWE $17K on the car (slightly less, just made a payment).

Question: If I paid the loan down by $5,000 to bring the balance to $12,000, would I have a better shot at refinancing since the balance owed would finally be less than the value of the car? I would like to cut the rate in HALF, but keep my loan term the same (4 years remaining).

Any and all responses appreciated!

<bump> all thru the nite!

Originally posted by davidkinde
Right now, I have a 2003 Toyota Corolla S that I purchased NEW in April, 2002. I put $150 down and now I have a loan at 11.5% that I've paid for 1 year.

Based on Kelly Blue Book for 2002 model Corolla's, the value of the car is only about $14k. I STILL OWE $17K on the car (slightly less, just made a payment).

Question: If I paid the loan down by $5,000 to bring the balance to $12,000, would I have a better shot at refinancing since the balance owed would finally be less than the value of the car? I would like to cut the rate in HALF, but keep my loan term the same (4 years remaining).

Any and all responses appreciated!

It would make it more attractive to the lender. I would to weigh all your options before you refi & sink $5k into the loan. If you plan to keep the car very long term & your goal is to lower the payments now, it is a good option. If you might trade this car in the next 2years it may be a waste of money. I would also check with your lender & make sure you can get a acceptable rate before you apply the extra $5k down. Let them know in advane what your plans are, if you apply the $5k & can only lower your rate 1 point you may be aggravated.

I actually went ahead and applied for a refi with my credit union. The loan is 1 year old, and I just wanted to lower my payment to give me some financial flexibility (baby on they way, due in Sept!).
I had applied 2x with them previously, but was declined due to (same old stuff insert here). I was hoping to get some good will from them if I prepaid some of the loan balance.

Well, to my suprise, I was APPROVED FOR THE REFI!

Current loan: Toyota Financial
19,900 initial loan balance
11.5%
60 month term
$437.81 monthly payment

New Loan: Wescom Credit Union
$16,700 initial loan balance
8.74%
72 month term
$300

RESULTS: SAVE $140 PER MONTH!

This is really good for me. I really needed the extra cash flow to start paying down my increasing CC balances. Once paid off (in 2 years) I'll accelerate the payoff of this newly refi'd loan.

That's awesome David, good for you!! (Hey, do you sleep?)

Originally posted by Amy B
That's awesome David, good for you!! (Hey, do you sleep?)

No, but neither do you! :) I'm usually up til about 11:00 PM Pacific time.

I'm always trying to find a new way (scheme) to lower my interest rates with all my lenders. That's why I LOVE CreditNet and Creditboards.com!

Owing less than the retail value is definitely something refinancing banks like to see.

When I was going to refinance my suv, they pulled my credit, and my score was 699. They told me that since my credit score is below 700 (their cut-off for the best rates), I needed to come up with a downpayment to cover the difference between it's worth, and the payoff amount or pay they'll have to give it to me @7.5%

I eventually, I got a couple of inquiries bumped, and raised my score 7 points, and they decided to give me the loan without needing the downpayment. It was a credit union... and I was $2K over the truck's retail.