Overhaulin'

How can I pay off my car loan quicker? Refinance an option???

I currently owe $26,000.00 on my car loan, with 8.9% interest. Would it be worth the refinance charge if it brought the interest down to 4.8% (the refinance charge would be approximately $2,000)? I'm on a six year loan. Is there any way to pay it off quicker?

Public Comments

1. It depends on how many months are left on the loan. If you just took the loan out, then yes it would be a good idea to refinance the loan at 4.8% rate if that is the best you can do. It is possible that you can pay off your loan by over paying your monthly payment (assuming there are not penalities for doing so) but, check you loan agreement first. Based on what you told me you are paying about $416/month for your car loan over a six year loan at 8.9% for a original loan amount of $26,000. Your savings per month would be $51 dollars and over a six year period at 4.8% discount rate that would have a present value of $3,188, so paying $2000 to buy down the loan rate is an ok idea but, why did you sign up for a 9.9% interest rate? That is a sky high rate. What is your credit score? I think you can get a better deal at a credit union.
2. when you refinance.. you typically make the loan drag out longer as you add more to the loan itself... adding the 2000 dollars to the loan kills the interest help especially upfront.. getting a second job would help you pay the loan off faster.. just be careful not to refinance to a lower interest rate that drags on longer also causing you to pay more in the long run.. smaller payments may make you lazy and not pay more upfront.
3. Since you already have the loan, why don't you just pay extra each month? If you have a simple interest loan, you'll pay about 70% in interest on the first 3 years. That's how bank make their money. You should also be able to request an amortization from the finance co or bank that will give you a monthly break down between interest/principal.