Car Refinance

[melc68]

Hi I filed chapter 7 I have my discharge. I purchased a used car with a high interest rate (20%). However my credit score is 658 could I get refinance?

[HHM]

Generally, the answer is no as refinancing rarely saves you money in the long run, to evaluate, some additional info is needed.

1. When did you buy your current car
2. What is the current payment
3. What was the original term of the loan (how many total months)
4. How many months are left to pay.
5. What is the current, FMV of the vehicle.

[SMinGA2]

Another issue when trying to refinance: a large part of your payment goes to interest, so you pay the principal down slowly. Especially if the loan term was 5 years or longer. Meaning the car is dropping value, but you still owe a lot on the loan. To refinance, your generally has to be worth as much or more than what you owe. (Each lender has its own ratio.)

[btbeme]

My two cents...

Many, many people get stuck in the mental rut that they can "afford" something if the payment is right.

They cannot afford it. OK, maybe only rarely.

You can afford your vehicle if you can pay - without sacrificing other necessities - the cost of owning, driving, insuring, and repairing that vehicle every day, no matter what might happen to it or to you. Got totaled in traffic on the way to work? No problem - you have a savings account to cover transportation costs until the insurance check arrives, and you have adjusted your insurance to cover the costs of repairing or replacing what you could not otherwise afford. So, made it to work safely today? Awesome ... except that layoffs have hit your department and you are on the list, but thankfully your tank is full and you do not have a late payment looming even though your unemployment check won't be enough to cover rent (but not your car payment) so thank God you have that savings account...

Etc etc etc.

Really, really - if adjusting a payment is they only way that you can afford that payment...then you cannot afford that payment.

That said, I say pay as little as possible for everything. Refinancing, as outlined above, is seldom a way to pay less...it is just a way to pay less today but much more over time.

[fatty]

If you have been paying on this loan for a period of time, and always ontime... possibly you can avoid potential refi costs by simply calling your lender and explaining to them that your credit scores have improved and that you are considering your options to refi, but first wanted to see if they would be willing to continue to work with you and lower you interest rates. Even consider to tell them you will keep the payments the same, thus with a lower interest rate you would be paying if off sooner and further limiting the lenders risk.

just a thought.

[AngelinaCat]

Unfortunately, many people believe that the only way to rebuild credit is to jump right in after discharge, and get a credit card or some type of loan. Typically these have very high interest rates and fees associated with them. And so they get hooked into the credit/payment drug all over again.

I am sorry, OP, I can offer no pearls of wisdom now. The better thing to have done was to save up your money and pay cash for a good, used car. You can find them on Craig's List, or on the side of the road.

[outsidetool]

Hi I filed chapter 7 I have my discharge. I purchased a used car with a high interest rate (20%). However my credit score is 658 could I get refinance?

Well, I had a similar situation and managed to trade in for a whole different car back in 2010 (BK7 DC in early 2009). Credit score ave 621. Big thing for either refi or new purchase will be equity and/or downpayment. I had $2k saved up, but they did still finance some upside down equity in the deal.