Refinancing - Auto/Student Loans

[scranton]

All,

With the interest rate down, I'm trying to refinance both my student and auto loans. My student and auto loans are at 5.5% and 6.7% respectively.

My questions is what are the factors to consider before refinancing, besides the obvious ... saving money, reducing my monthly payment.
Also, what's a good financial institution to go with (e.g: name of bank, etc and why)?

I've never both a house but I know those people at some of this financial institutions don't have my best interest even though the first thing they tell you when you walk in is ... "I'm here to help you ...". All they're interested in is their commission, etc.

Can anyone offer some insight or insider advice? Would be greatly appreciated.

[Philip Brewer]

My experience is terribly out of date, but back in the 1980s it was impractical to refinance a car loan. They treated it as a "used car" loan, which had higher rates and lower loan-to-value ratios. The result would have been a much worse loan.

Student loan refinancing is a different story--it was the original purpose of Sallie Mae. You could (only once!) refinance all your student loans into a single loan with a fairly low rate. There again, I'm afraid, I don't know much about current practice.

Do be careful with student loans, as there's practically no way to discharge them in bankruptcy. If there's any danger that you'll get yourself over your head in debt, make sure that your student loans get paid off early. (Since the rate on the student loans is usually the lowest, though, the usual advice would be to pay them off last. The conflicting pressures make it hard to pick the best path.)

[Julie Rains]

Gee, Philip, that brought back memories -- I refinanced my first car in the 1980s and didn't know about the "used car" rate until I went to get the loan; it was a lower rate but was not as good a deal as I thought it would be.

I don't have student loans either -- I am sure those who do can step in and offer more advice -- but the main thing about those is that you want to keep any special provisions associated with student loans. For example, you may be able to get a deferment if you are unemployed using a federal government-backed loan; but if you refinance the loans to a private lender, then you'll lose that benefit. So you probably don't want to go from a government-backed loan to a private loan.

This isn't a name brand but you might consider a savings and loan (I have a business account with mine and when I call, a live person actually answers the phone) or a credit union. The main thing I would watch out for would be add-ons or cross-sales of additional products, besides avoiding origination fees, maintenance fees, or variable rates.

[khorrell]

It's been a while since I had to deal with student loans (thankfully!), but I've refinanced many a car. I use a credit union and a small bank, both of which I've chosen for their excellent rates, good customer service and quality products. From time to time, I would notice that one was offering a "refi" promo and I'd run a few numbers. There are usually very few (if any) fees involved with refinancing a car loan (just to refile the lien on the title, if your state requires it.) I know that I've saved a chunk of money by doing that.

Another thing that I have done is ask my bank to price match a competitor's interest rate. For example, I would call the bank that had my car loan and say, "You know, Joe's bank down the street is offering me 2% interest if I refi with them. Can you lower my rate? Amazingly, this has worked. What usually happens is that they don't reamortize the loan (so your payment remains the same) but the term will be shorter because you're not adding on as much interest.

I encourage you to shop carefully, but I imagine that you can find a better loan out there!

[khorrell]

I forgot to mention, many banks/credit unions will offer a small discount for automatic payments (maybe .25%) If you know that won't be a problem, sign up for it!

[jdp]

If you have federal student loans I would look at this
http://www.aessuccess.org/manage/con...te/index.shtml
And yes if you sign up for auto-pay there is a .25% interest reduction but your loan must be in good standing.

I opened this link because I was just thinking of refi on my car the other day. I'd love to be able to pay it off sooner because of a lower interest rate. It bugs me even having a car payment lol.

[khorrell]

scranton, I liked answering your question so much that I wrote a blog post about it. Check it out: Refinance Your Car? Why and How Thanks for the inspiration

[darryl]

Depending on the terms of the original car loan, auto refinancing may help debtors to reduce monthly car payments and save money.The debtor has two options when it comes to car refinancing: find a new lender or refinance with the current lender at a lower interest rate. Numerous websites provide refinancing services and competitive refinancing quotes.

[darryl]

We have put together a short list of the most popular private student loan lenders and consolidation companies. These companies will either loan you money for college or repackage your multiple student loans into just one single loan, providing you with a smaller monthly payment and allowing you to have a better monthly cash flow.

There are a few popular lenders that will borrow you money and a couple of services that will help you consolidate your student loans. These loans are for students, with the Federal Stafford Loans, as well as for parents — Federal PLUS Loans (loans for parents of undergraduate students).