Anyone refinanced lately?

[UncleBrad]

So you're going to refinance to pay them all of the money that is otherwise interest-free to pay?

In my mind, giving anyone else my money when I can make more by keeping it is worse. Thus, I have no problem with car loans and home loans, because I make more money keeping my money that paying for a car with cash, even factoring the interest paid on the loan. Also, paying $6,000 at once is far more disruptive to me than $500/month for one year. What happens if you have another cash emergency? Now, if I had ot pay a high interest rate, that would be a different story.

Example:

Financed a car at 1.9% interest and kept the cash invested, and before the loan was paid off, I had already earned enough money that I could have paid cash for the car. $35,000 initial cash + $35,000 earned - $36,700 principal and interest paid + $25K car residual value > $25K car residual value.

Finances are an individual decision, I get it. But if I have to work, then my money has to work just as hard.

Excellent point. My oldest son, who bought a new Bronco Sport last year, pays cash for everything. He is, well, FRUGAL. He could fork out over $30K in cash, but he had zero credit rating because he's never had a loan in his life. He ended up exploiting Ford Credit's super-low interest available at the time - not because he had to, but because in some circumstances it may work out better for him in the future. Another thing: lease or loan payments can be itemized as expenses for businesses, and often can be turned in as business losses due to vehicle appreciation. Bottom line: it's not always as simple as "hey, look at me: I paid cash for this thing!"

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[timhood]

Excellent point. My oldest son, who bought a new Bronco Sport last year, pays cash for everything. He is, well, FRUGAL. He could fork out over $30K in cash, but he had zero credit rating because he's never had a loan in his life. He ended up exploiting Ford Credit's super-low interest available at the time - not because he had to, but because in some circumstances it may work out better for him in the future. Another thing: lease or loan payments can be itemized as expenses for businesses, and often can be turned in as business losses due to vehicle appreciation. Bottom line: it's not always as simple as "hey, look at me: I paid cash for this thing!"

Side bar for anyone still reading :

When you plan to pay for a vehicle with cash, don't announce that to the dealership before you've agreed on a price. They don't see your cash purchase as a good thing. The opposite is true. It's one less area where they can make money. So, be quiet about that, and if asked, either lie and tell them you're planning on financing, or be vague and say something like "if you can get me a good rate..."

 

[indio22]

So you're going to refinance to pay them all of the money that is otherwise interest-free to pay?

In my mind, giving anyone else my money when I can make more by keeping it is worse. Thus, I have no problem with car loans and home loans, because I make more money keeping my money that paying for a car with cash, even factoring the interest paid on the loan. Also, paying $6,000 at once is far more disruptive to me than $500/month for one year. What happens if you have another cash emergency? Now, if I had ot pay a high interest rate, that would be a different story.

Example:

Financed a car at 1.9% interest and kept the cash invested, and before the loan was paid off, I had already earned enough money that I could have paid cash for the car. $35,000 initial cash + $35,000 earned - $36,700 principal and interest paid + $25K car residual value > $25K car residual value.

Finances are an individual decision, I get it. But if I have to work, then my money has to work just as hard.

Problem is everyone is Warren Buffett ... until they're not. If investment returns were guaranteed we'd all be rolling in money.

I'm down with riding out a 0% or even relatively low interest rate loan for a while. But too many people one way or another end up paying too much on loans for material items.

 

[BroncoChallenger]

Excellent point. My oldest son, who bought a new Bronco Sport last year, pays cash for everything. He is, well, FRUGAL. He could fork out over $30K in cash, but he had zero credit rating because he's never had a loan in his life. He ended up exploiting Ford Credit's super-low interest available at the time - not because he had to, but because in some circumstances it may work out better for him in the future. Another thing: lease or loan payments can be itemized as expenses for businesses, and often can be turned in as business losses due to vehicle appreciation. Bottom line: it's not always as simple as "hey, look at me: I paid cash for this thing!"

This is so true - paying cash for everything sounds GREAT until you need to make a major purchase and have zero credit history.

I worked with a guy years ago, who after renting for 15 years decided to buy a house with his wife. He was denied a mortgage because he had NO credit history, no credit card, no car loan, NOTHING. The only reason he could get a standard mortgage was because his wife had opened a Sears card when she was 18 with like a $500 limit on it, so she had a credit history.

Payments aren't a BAD thing, in the grand scheme of things. You just have to watch what those payments are ON. Because if you have zero payments, it means you show up as a liability to anyone who uses your credit history as part of their algorithm to determine risk. If you have zero credit, you're a HUGE risk in their eyes.

 

[Amcole1984]

So you're going to refinance to pay them all of the money that is otherwise interest-free to pay?

In my mind, giving anyone else my money when I can make more by keeping it is worse. Thus, I have no problem with car loans and home loans, because I make more money keeping my money that paying for a car with cash, even factoring the interest paid on the loan. Also, paying $6,000 at once is far more disruptive to me than $500/month for one year. What happens if you have another cash emergency? Now, if I had ot pay a high interest rate, that would be a different story.

Example:

Financed a car at 1.9% interest and kept the cash invested, and before the loan was paid off, I had already earned enough money that I could have paid cash for the car. $35,000 initial cash + $35,000 earned - $36,700 principal and interest paid + $25K car residual value > $25K car residual value.

Finances are an individual decision, I get it. But if I have to work, then my money has to work just as hard.

Sweetheart, either way I have to pay the money. And I didn't say I was going to refinance, I was just asking questions.

 

[LarryZiegler]

6.75% and that was with an 820 credit score.

You weren’t very smart with your financing choice. I financed in Dec 2021 at 1.9% w/BofA.
current lowest % rate in my area is 5.75% using a couple of credit unions. IMHO , you are stuck with what you have.

 

[timhood]

You weren’t very smart with your financing choice. I financed in Dec 2021 at 1.9% w/BofA.
current lowest % rate in my area is 5.75% using a couple of credit unions. IMHO , you are stuck with what you have.

To be fair, rates at 12/21 and 01/23 or 02/23 were significantly different. A great rate a year after you got your loan would have been 4.99% for 5 years. It's possible that OP financed for more, which would have pushed that rate up, so 6.75% for a 6-year loan, for example, wouldn't have been terrible--perhaps 1 point higher than the best possible rate and likely pretty typical or even on the lower side among most lending institutions.

 

[telenerd]

My bronco I paid off extremely early just making two principal payments every month. Paid very little interest on the loan. Doing the same now for my Ranger Raptor. I’m down to 30k on that loan and should have it paid off by February 2026. Next I’m gonna focus on paying off my house.

 

[LarryZiegler]

To be fair, rates at 12/21 and 01/23 or 02/23 were significantly different. A great rate a year after you got your loan would have been 4.99% for 5 years. It's possible that OP financed for more, which would have pushed that rate up, so 6.75% for a 6-year loan, for example, wouldn't have been terrible--perhaps 1 point higher than the best possible rate and likely pretty typical or even on the lower side among most lending institutions.

You must have misread the original post. The OP financed the Bronco in Dec 2021 per the posting, the same time I financed mine, thus sub 2% rates were in existence at that time. Also what was said was that the monthly payment is $1,000. This is accurate for a 5 yr loan of $50,000+ at the 6+% interest rate and with a 820 credit rating, eligibility to lower interest rates should not have been a problem. Knowing the value of money borrowed is just as important as negotiating the best price of the vehicle. With current interest rates being what they are, this person is pretty much stuck.

 

[timhood]

You must have misread the original post. The OP financed the Bronco in Dec 2021 per the posting, the same time I financed mine, thus sub 2% rates were in existence at that time. Also what was said was that the monthly payment is $1,000. This is accurate for a 5 yr loan of $50,000+ at the 6+% interest rate and with a 820 credit rating, eligibility to lower interest rates should not have been a problem. Knowing the value of money borrowed is just as important as negotiating the best price of the vehicle. With current interest rates being what they are, this person is pretty much stuck.

Yeah, I remembered it wrong...

 

[indio22]

My bronco I paid off extremely early just making two principal payments every month. Paid very little interest on the loan. Doing the same now for my Ranger Raptor. I’m down to 30k on that loan and should have it paid off by February 2026. Next I’m gonna focus on paying off my house.

My wife and I did that with our house, making the double payments, saved big on interest, nice having zero debt now. Be sure your extra payments go to pay down the principle.

 

[duel007]

My wife and I did that with our house, making the double payments, saved big on interest, nice having zero debt now. Be sure your extra payments go to pay down the principle.

For sure - definitely check your statements every month. I have to fight my credit union nearly every time I make a principal only payment because they keep just applying it as a regular payment, even though I submit it as principal only.

I also tried mailing in a check with payment stub, selecting principal only, and writing principal only in the memo on the check. Still no luck, had to call in and have them change it.

 

[92EddieBauerNC]

You weren’t very smart with your financing choice. I financed in Dec 2021 at 1.9% w/BofA.
current lowest % rate in my area is 5.75% using a couple of credit unions. IMHO , you are stuck with what you have.

I think the big thing we’re missing on this post is the term and advance on the loan. If the term was 6+ years and the advance was well over the value of the new car that 6.75 rate might not be as bad as it seems.

i had equity and did 72 mos at below 2% in Oct of 2021 with the same score.

 

[arthur6]

Posts above are correct, he's paid most of the interest already. People don't understand how loans work sometimes.
Also....I haven't borrowed money in 25 years. I have and use one credit card, carry no balance. My credit score is 826-ish and I have no idea why.
The last 10 o so cars I bought I agreed to finance but paid for the car in the finance office after they printed all the contracts and agreements. They weren't happy.

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