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- I had terrible credit for years. I was finally able to buy a car by co-signing with my father.
- I worked hard to increase my score and bought a new car on my own, but my interest rate was 10%.
- Once I had gotten my score even higher, I refinanced for a lower rate and lower monthly payments.
My credit has been terrible for most of my life, which means I could never even consider getting a reasonable loan on a new or used car. After getting sober in 2012 and getting my license back, I basically found $500 cars on Craigslist and drove them until they broke down. I would deal with the stress of that until I found another threshing car, and then I would start that cycle all over again.
Finally I repaired my credit to a point where I was able to buy a car by co-signing with my father. For two consecutive years, I have never missed a payment on this car. After a few years, I was able to repair my credit enough to get another car without a co-signer.
I bought this new car just before the COVID-19 shutdowns; when the pandemic hit, I started working from home like millions of other Americans. Besides not being able to drive it, I was paying way too much for the car and I didn’t even realize it.
I was able to get the car for around $23,000. Due to my credit score being in the mid-500s, I received a subprime loan with 10% interest. I wanted the lowest repayments possible, so I opted for an 84 month loan.
By the time I paid for the car, it would have cost me over $9,000 in interest.
I worked hard to fix my credit – and it paid off
Last year, I went on a mission to repair my credit, and I increased my score by more than 100 points since. One of the best things I did was start reading books and learning about personal finance, and the best book I read was “I’ll Teach You How to Be Rich” by Ramit Sethi . His book taught me so many.
In addition to helping me repair my credit, the book taught me that when buying a car, you should prioritize a low interest rate. Most of us make the mistake of prioritizing monthly payments, but as you saw the interest was going to make my car cost $9,000 more than I bought it for. . Sethi also taught me what is refinancinghow it helps and what motivates banks to do it.
My original lender got me more than a barrel. I had a low credit score so it was almost like they were doing me a favor by lending me money which meant they could charge me high interest. But when I fixed my credit, I had more options.
In fact, I wasn’t even considering refinancing at first. My dealership kept sending me letters asking to buy my car back because due to the global chip shortage and other factors, it was in high demand and had increased in value by thousands of dollars. But my seller was unstable, so I decided to just refinance instead of letting them buy the vehicle back.
My main credit card is with Capital One, so I started researching and found out they do car loans. Since I have never missed a credit card payment and have been with them for years, I asked them about refinancing. Originally they sent me a quote for 7.5% interest, but I knew I had leverage. I explained how I was a loyal and responsible customer for years and negotiated them down to 7.03% interest.
The original bank couldn’t match this, so I went through the refinance process with Capital One. There was a lot of paperwork emailed, notarized, and mailed to do this, but it was worth it.
My car payments have gone from $450 a month to around $350, and I’ll save $1,700 over the life of my loan.
I got money back after refinancing
One day I received a check in the mail from my old lender for $486.76. I thought that was a mistake. A few weeks later I received another check for $613.66.
I thought that must have been a mistake too, and any day they were going to call and ask for the refund. But after a Google search for “money back after refinancing” I learned that since my car had gone up in value, there was positive equity they had to pay me when my new bank bought out my loan. .
After all, I saved money on my monthly payment and the entire loan, and even made over $1,000. This was all due to my training in credit repair and the benefits of refinancing, and now I love sharing that knowledge with others.
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