Author Topic: Auto Refi -- owe too little?  (Read 828 times)

frugalfoothills

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Auto Refi -- owe too little?
« on: March 05, 2019, 09:15:52 AM »
My only consumer debt is an auto loan with $8,200 left on it, [tentatively] scheduled to be paid off by this summer. I'm throwing at least $1K a month at it currently. Rate is 4.25%.

I've seen folks around here talk about refinancing their auto loans down to a lower rate of 1-3%, and saving/investing the money instead. That sounded tempting so I started exploring rates I could get on a refi to see whether it would make sense to switch gears. I've talked to 3 places and they've all said that my loan needs to be at least $10K for them to consider a refinance. (These aren't big banks or credit unions -- think places like rateGenius, etc.)

Is this standard practice? I was kind of surprised to hear that but I've also only ever done one refi and it was on a mortgage, so I don't have any prior experience refinancing smaller loans. I don't really care either way, I'll just keep on trucking with the original plan, but has anyone else experienced anything similar? Is it just limited to these smaller 3rd party financing companies and maybe I'd have better luck with an actual bank or credit union?

plog

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Re: Auto Refi -- owe too little?
« Reply #1 on: March 05, 2019, 09:27:09 AM »
It's not worth it, for the bank.  And even you.   You are going to pay your loan off in less than 6 months:

(8200 * .0425)/2 = 174.25 in interest

Actually, since that 8200 will be decreasing each month this loan is worth less than 174.25 in interest.  Lower the rate to 2% and the lender stands to make even less:

(8200 * .02) / 2 = 82 in interest

Again, that's the top end because the balance will be lowered each month.  If this takes more than 1 business day of your time to take care of, you are making near minimum wage by doing it.

frugalfoothills

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Re: Auto Refi -- owe too little?
« Reply #2 on: March 05, 2019, 11:11:15 AM »
Thanks! I guess it was just strange to hear that they have a hard threshold of $10K. I don't plan on putting any more effort into it... was more just something I was putting some feelers out for in case there was some other awesome alternative I wasn't considering. Sticking to the boring payoff plan :)

frugaliknowit

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Re: Auto Refi -- owe too little?
« Reply #3 on: March 05, 2019, 11:47:00 AM »
Oy-veh, be done with it and pay it off...