I was financed with bi-monthly payments of $179 and an intrest rate of 29%. I was told that if I focus on making these payments on time, it can actually improve my credit score. Then if I can save, say, another $1,000 to put down later and then refi, that could also change the high intrest rate and improve my score even more?
My credit is horrible… I’m working on fixing that now. Buying a clunker is not an option. Seeking answers from financial professionals.
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I’m not a fin. pro, but recently tried to do the same thing. You have to check the financing agreement you signed when you got the loan. Many of them have an “early repayment penalty” that you’ll get dinged with if you try to re-fi before that time (mine was 18 months). The fee would have made it a worse deal to re-fi than if I stayed in the loan until the 18-month period was over.
You may be able to get the pre-payment penalty waived if you re-fi with the same lender. That wasn’t an option for me, but the banks are looking more desperate these days, so give it a try!
Yes it is possible to refinance after only a few months, but you will definitely want to have at least paid off $1000 from the principle balance (on top of your monthly payments) before considering refinancing.
The general rule of thumb is that every $1000 financed is about $20 in monthly payments (something to keep in mind to help know how much you would save if you refinanced).
I would also ask if the company financing the car can handle the refinancing of the vehicle (this will make the process much easier if they do). I used to have AmeriCredit and they told me they didn’t refinance vehicle’s, so you may have to go through you’re own bank which will normally help with your interest rate.
Credit is something that takes a while to affect, though there can be some positive reflections after just 3 months, a year’s worth of responsible payments will have the greatest overall affect.
Good luck on refinancing your car, and remember that just because a car is old doesn’t mean it’s a clunker!