| Need Advice: Paying off Car Loan by Personal Loan |
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genesisx
First Time Poster
Cash: $ 0.25
Posts: 1
Joined: 11 Oct 2007
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| Need Advice: Paying off Car Loan by Personal Loan |
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Hi Everyone!
Is it advisable to pay off my car loan that has a term of 72 months with a remaining terms of 54 - 55 months more by getting a personal loan. My APR for the car loan is I think 9.XX %. If I get a personal loan to pay off my remaining balance on my car loan with the same APR would I be just reducing my credit score for nothing?
If I get an APR lower than 9.XX% for personal loan, is it advisable to pay off my car loan using a personal loan? Wouldn't I be just paying double?
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Thu Oct 11, 2007 6:39 pm |
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efflandt
Senior Member
Cash: $ 80.45
Posts: 401
Joined: 25 Apr 2005
Location: Elgin, IL USA
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It does NOT make sense to get a personal loan to pay off your car loan unless it is at lower interest and/or shorter term. It somehow seems unlikely that you could get an unsecured personal loan at a lower rate than a secured car loan. Although, if you have a credit card with sufficient credit, no outstanding balance, and lower teaser rate for unlimited time, you could possibly come out ahead using that. But do not overlook a possible 3-4% balance transfer fee, which might have a limited maximum, but often not.
If interest is the same, there is no savings, especially if you take longer to pay it off. Even if you get a lower interest rate and plan on making smaller payments longer, you would need to calculate whether you would be paying more total interest for more smaller payments.
I have not had a car loan for many years, so I do not know if they charge APR on the remaining principal (like a credit card) or if they still use "Rule of 78's". Rule of 78's was some method I did not understand that averaged the quoted rate, but somehow charged a higher percentage of the interest initially (sort of built-in prepayment penalty). So if you paid off the loan early, you might end up paying a higher effective interest rate for that time.
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Fri Oct 12, 2007 12:06 am |
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