Hi mustachians!
I get a lot of stupid "pre-approved" credit card and other loan offers or junk mail. However, this one has me thinking twice. The eye-catching bolded title: "we'll beat your auto loan rate by 2%." Some background...I bought a truck in March 16 with a 60-month loan at 4.54%, so bring on the face punches. It was before I started getting interested in personal finance and FI and MMM, so it was a decision I regret. The original loan of 18,000 is already down to 13,000.
I hear a lot about people refinancing their home but have never heard about doing it for an auto loan, so I wanted to know what you guys think. Let's get into the fine print and # details of my situation.
My current loan is really close to 13,000 so let's just call it that to make it easy for math purposes. 4.54%. Originally 60 months, so currently at about 42 left to go. I'm about to finish paying off student loans, so maybe when I'm done with them I can pay over the minimum on the stupid truck loan, so I can finish well before the original 60 months...who knows. My current loan is with Bank of America, Idk if that makes it better or worse. I bank with them and they offered me a % much better than anyone else would. My credit is good, not great (~700). Yeah, I should probably change banks. Please keep in mind I'm very new to all of this FI stuff and just trying to make changes slowly and be more aware of my choices for now :)
New offer from local credit union...after reading the fine print, the floor minimum they will use for the new loan is 3%. So, closer to 1.5% difference. Not 2%, but still a big difference. Other fine print...pre-approved, obviously. 90 days no payment, but would still accrue interest during that time. I'd probably just pay three times during the initial 90, as usual. "XXCU does not charge application or refinance fees. Vehicle title transfer fees will apply....Membership in XXCU is required."
OK, so my math looks like this.
Current BOA loan 4.54%: 14,085 total
Offered XXCU loan 3.0%: 13,711 total
Yeah, I should look at the fine print of my current stupid truck loan to figure out the fees and fine print for transferring it to a different institution. But besides from that...
Is my math correct? Has anyone else done this, and what was your experience like? Is the $374 difference enough to make you seriously considering switching? Or would it not be worth the hassle for you? What's your threshold for a switch like this? In other words, how much do you need to save for it to be worth the trouble for you? $1? $100? $1,000?
Any thoughts or comments would be greatly appreciated. Thanks!