Overhaulin'

Borrow loan from bank to pay off car loan for lower interest rate?

I currently am financed for 8.85% for my auto. I bought it in 2006 and matures in 2012. I have about 15K left to pay. Should I try to borrow a loan from a bank for 15K to pay off my vehicle if they lend me money at a lower interest rate of 8.85%?

Public Comments

1. sorry banks take a dim view on refinancing 'used ' cars and at higher rates. 15K is less than 24 months working a pizza delivery nights. smarter move. visit dave ramsey.com to view 'drive free, get rich' so u'll understand the money lost in cars.
2. Well... How long would the note be for? To really lower the payment you will have to take out another 6 year note... In return you will end up making many more payments. If you take out a 5 year note with a lower interest rate your payment would probably be a little bit lower. Smart thing to do if you do refinance your car loan would be to get a 5 year note. If you can talk to the bank and get a 5 year note with lower interest and a payment lower than your current one then go for it. Otherwise leave it alone. You never want to pay longer or more than you have it. Example: If your current note is 4 months under 5 years to go then when you take out another 5 year making your payments 330 instead of being 350. You will then have to make 4 more payments of 330 which is a total of 1320. In return you save $20/month over the 4 2/3 yrs you would have had left on your loan if you didn't refinance. That is 56 payments saving $20 each for a total of 1120 in savings. But you will have to pay 4 more payments totaling 1320. So in reality you would lose money. Just look over the numbers and dont get pushed over by some bank rep that makes money off you taking a loan out.
3. in general,,, the answer is yes,,, you should borrow at lower rate... but please consider that borrowing for just 8.84% would not be wise... you should take into account all commisions related to the loan (for example pledging your car, etc.)... if there are not that kind of commision fees to be paid than you can feel free to borrow at a lower rate.... if you want the financial rule, here is how you can identify the better choice: in MS Excell open the formula PMT(do it for to examples): rate- 8.85%/12+any annual fees you are paying in first example and the lower rate you found+any annual fees the other bank requests in the second example nper- months left before maturity {60 (5years*12months) or something like this} pv- 15000 in one example and 15000+all commision fees that must be paid at the beggining of the loan in the second example fv - 0 type - 1 out of the two examples wich PMT appears lower is superior