Refinancing - What's the deal?
 

Hi guys,

I'll make this quick. I accepted a high interest rate because of my lack of credit history. How long should I wait to refinance, and when I do, will my same lender consider me or will another lender have to buy out my loan? (Currently I'm with Nissan Motor Acceptance)

Thanks!

How old are you? Do you have at least 2 forms of revolving credit? What is your current rate?

If you have at least 2 revolving credit lines, and pay everything on time, you should be able to after about 18 months.

Would you refinance someone for a lower rate that your already financing them for? NO.

Also, don't wait too long to refinance. If you've already made about 2 years or so of payments (on a 60 month loan), you have already paid most of the interest portion. At this point, the majority of your payment each month goes to the actual balance.

Refinancing at this point would mean that you would paying mostly interest again for the next few years.

Agreed. Some people dont realize this though.. they just want a cheaper monthly payment that they can afford.

This is a very interesting discussion. (lol@pun, but I'm serious)

If I pay more than my payment, does that extra cash go toward the principle? Or the interest? Or does that depend on my particular contract?

I too am interested a refi, though I thought you could do this even in the 3rd year

There must be something to gain for the new lender. Long term loan stringing out interest for years.

Also keep in mind that the new lender is financing the car at a used car value. You must have some equity to mitigate the risk.

You can do a refi in the 3rd year. You can even do it in your 4th year if your balance is high enough. But like Master Shake said, it may not be beneficial to you because most of the interest has been paid up on the loan already in these years. If you refi, most of the first couple of years of payments go towards interest on the new loan.

Unlike a mortgage where you can pay extra principle, interest, or escrow by choice with a Nissan Motor Acceptance loan the extra money just goes towards next month's payment. I have never seen principle and interest broken out separately on a Nissan Motor Acceptance loan but that could be a state-by-state requirement.

Correct. Interest is based on the balance.

You are welcome.