Refi of Car Loan

Discussion in 'Credit Talk' started by chriscraft, Jul 23, 2001.

  1. chriscraft

    chriscraft Well-Known Member

    Folks, I need your advice. I presently have a car loan which is 30-days past due and which is showing as such on my Experian credit report. I have been running one payment behind for a number of months and have been unable to get it caught up to date. My lender has offered to refinance the loan for me, and I am wondering whether, strictly from a credit standpoint, I should consider their offer.

    Here's the particulars on the loan. I owe $8658 and have 17 payments remaining on a 60 month loan. The interest rate is 17.60%. They will refinance the loan, with no fees or costs, over 24 months, at the same interest rate. The new payment would be about $8.00/month less than the currently payment (but if I factor in the late charges I am paying every month, it increases that savings to like $40/month).

    The lender will not "delete" or "re-age" my existing loan under any circumstances; thus, regardless of whether I can bring the existing loan current or I refinance it, I will still have the 30-day late notation on my report. If I were to refinance and stay current, though, I would have a positive installment account being reported.

    I know that strictly from a mathematical standpoint I should just find the way to get current and payoff the existing loan over the remaining term, but I am most concerned with getting the best credit effect out of this. Would I be better off to just get current on the existing loan, stay current on it, and then challenge the late pays on my credit report? Or do the refinance, while at the same time challenging the late pays on the old (refinanced) loan?

    Any and all opinions would be really helpful to me. Thanks guys and gals for your input.
  2. breeze

    breeze Well-Known Member

    Refi is pretty drastic. Sometimes they will take one or two months payments and move them to the end of the loan you already have, and you just pay the interest on those months. Has anyone mentioned that?

    Which finance company is it?

  3. chriscraft

    chriscraft Well-Known Member

    Breeze - no, nobody has mentioned that to me. When asked, the lender (WFS Financial) told me that if I were to refi, they would payoff the existing loan in full and open a brand new loan account for me. So, I'd end up with two loans being reported to the bureaus - the old, paid-off loan (the one with the 30-day lates), and the new, refinance loan (paid current).

    I guess what it really comes down to for me is (1) from a credit standpoint, is it better to just tough it out on the existing loan, or get myself immediately current through the new loan (at a cost of probably $1600 in extra interest over the life of the new loan); and (2) if it is best from a credit standpoint to do the refi, does it make any sense economically? Of course, what also factors in is the likelihood I can get the 30-day late pay notations deleted. Is it more or less likely for me to get them deleted if the loan is paid off in full?

    I wish I knew the answers to these questions. Again, opinions and advice are needed.
  4. chriscraft

    chriscraft Well-Known Member

    In considering the credit aspect of this, I also have to consider that if I did the refi, I'd have a new account being shown on my report, which could reduce my credit score. But would this reduction be offset by the fact that I have paid off in full a loan which was being shown as delinquent? Hmmm...anyone?
  5. zcraws33

    zcraws33 Well-Known Member

    I am no expert. But if it were me, I would just try to get caught up and pay the existing loan off as scheduled.
    I think the one loan with the longer payment history would look better from a credit standpoint than 2 loans, with one showing a short payment history. also two, then you would have TWO finance accounts on your credit report rather than one and from what I have read here..the finance accounts create a decline in your credit score.

    the issue with the late payment you would have to address whether you refi or not. either you can address that after you pay off the loan by again asking WFS. If that doesnt work dispute with CRA.
    you could also let the late payment age a bit (4 to 6 months from the actual late pay) and ask WFS again about having it removed. if that doesnt work dispute it with the CRA. so on and so forth

    Just my opinion..but whatever you decide..GOOD LUCK

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