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Posted in Auto Loans
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Shining1

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Owe 26 payments at $352.00 should I refinance loan from5.25% to 4.25% for 60mo, 48mo or 3yrs?
I could also use the equity to pay off car and have money in pocket?

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Whenever you finance something, the majority of the interest being charged is being repaid during the earliest payments.  Right now, the amount you would be repaying during the final three years would be going towards the principal.  If you were to get it refinanced, keep the repayment period as short as possible so you don't end up spending a whole lot more in interest.  Personally, I don't see a great deal of benefit to be gained by refinancing.

Top Contributor
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So here is a breakdown by the numbers:

Based on the what you provided, your current outstanding balance is roughly $8632.35. (give or take a few, since you didn't give me an exact payment.)  Over the remaining life of the loan, you will pay out $519 in interest.

You didn't include the cost of the refi, but I'm sure there is one; that's how the banks will typically make money on the front end and then make it on interest on the back end.

If you were to refi at the terms you stated, ex-fees which you didn't include, you'd pay:

  • At 36 months: $255.84, which is a payment reduction of $97.  However, going full term (no-prepay), you will pay an additional $58 in interest ($573) over the life of the loan.
  • At 48 months: $195.89, which is a payment reduction of $156.   Over the life of the loan, you will pay $251 more in interest, or a total of $770.
  • At 60 months:  $159.96, which is a net reduction of $192.  However, this option leads you to pay more, to the tune of $445 more, than you'd pay currently, for a new total interest amount of $964.

I would avoid using equity to secure a depreciating asset.  Or to have cash in your pocket.  That's a way to nickel and dime yourself out of your house and into a poor house.

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