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      03-06-2019, 06:43 PM   #1
MrGatsby
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Auto Refi advice needed

Hi all,

When I had initially purchased my M3, I unfortunately fell for the salesman's rhetoric. This being my first large purchase through financing, I was sold a high rate (9.9%) with the promise that 6 months of on time payments, I could refinance to a lower rate. The 6 months have since passed, so I attempted to refi with my current bank with no luck. I have spent as much energy as I am willing to try to have them to stick to their word. I no longer want to give them my business.

So I have been exploring other lenders. I have received a quote for 7.49% which is less than my current rate, however they were "requiring gap insurance" in order to get that rate. This seemed very shady to me, as I have positive equity in the vehicle of about $3,000.

My current car payments make up just 6.5% of my monthly pre-tax income, my credit score is a 675, and I owe less than 2k on all other debts including credit cards. I am young, with only 4 years of credit history, so perhaps this plays a part into why I am seeing rates like these.

Looking for some guidance on how to find the best rates here, as I do not want to make another mistake with a bad lender.

Best,

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      03-06-2019, 06:50 PM   #2
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Check with a credit union and other local banks where you can build a relationship and they might appreciate your deposit accounts, credit card account etc. Or just pay the car loan off as fast as you can.

A service like CreditKarma (free) can help show you options, and there are other online resources, but I always prefer to bank and borrow locally if I can.
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      03-06-2019, 06:51 PM   #3
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Yeah a credit union usually has better rates.

I was lucky and got a 1.99 through BMW
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      03-06-2019, 06:58 PM   #4
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Try PenFed. When I bought my first M3, I was young and had little credit history but I was able to lock in 1.49% with a cosigner (not sure if you have that option).

I recently went with PenFed again for a refi on a new car and got 3.49%. Good luck
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      03-06-2019, 07:00 PM   #5
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Rates have been on the rise, so that is part of your problem. They are likely to continue in that direction so finding a significantly lower rate may get more difficult. You can see what AAA estimates as another source.

As suggested, try to pay off quickly. Another alternative is to sell the car and find something you can buy as a cash purchase. 675 is not going to get you the best rate and bear in mind that each time you apply for credit it affects your score.
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      03-06-2019, 07:01 PM   #6
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Quote:
Originally Posted by kevin///mlee View Post
Try PenFed. When I bought my first M3, I was young and had little credit history but I was able to lock in 1.49% with a cosigner (not sure if you have that option).

I recently went with PenFed again for a refi on a new car and got 3.49%. Good luck
Love me some PenFed. My M2 is financed through them for an absurdly low rate.
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      03-06-2019, 07:07 PM   #7
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You're likely having difficulty with a smooth refi at the lowest rate due to your credit score of 675. That's essentially Tier 2 credit. DTI may also be a factor working against you.

As others have mentioned, your best bet is to try a credit union. Try PenFed, Navy Federal (if you're eligible) and Alliant. Worst case scenario pay off the loan with a lump sum or accelerate your payments to retire the debt as soon as possible.
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      03-06-2019, 07:12 PM   #8
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Quote:
Originally Posted by RickFLM4 View Post
Rates have been on the rise, so that is part of your problem. They are likely to continue in that direction so finding a significantly lower rate may get more difficult. You can see what AAA estimates as another source.

As suggested, try to pay off quickly. Another alternative is to sell the car and find something you can buy as a cash purchase. 675 is not going to get you the best rate and bear in mind that each time you apply for credit it affects your score.
Certainly. I have been cautious as to the hard hits, only allowing 1 hit so far which got me that 7.49% rate. The others have been pre-qualified offers with soft hits.
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      03-06-2019, 07:18 PM   #9
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Quote:
Originally Posted by Clark_Kent View Post
You're likely having difficulty with a smooth refi at the lowest rate due to your credit score of 675. That's essentially Tier 2 credit. DTI may also be a factor working against you.

As others have mentioned, your best bet is to try a credit union. Try PenFed, Navy Federal (if you're eligible) and Alliant. Worst case scenario pay off the loan with a lump sum or accelerate your payments to retire the debt as soon as possible.
Unfortunately the 675 is simply due to lack of credit history. 4 years ago I started the process of building credit. I opened 5 cards, put small recurring charges on each and pay the balances off in full each month. Not much I can do but keep making on time payments. With the recent purchase of the auto loan, it brought my average age of accounts to 2 years. -- most likely the issue I am facing.

DTI shouldn't be an issue as its under 25% entirely including all debts.
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      03-06-2019, 07:29 PM   #10
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1) Never trust anyone at a car dealership if it isn't in writing.

Lesson learned, that's for sure.

2) It is against FTC law and against FL CPB law for a lender to require GAP Insurance to finance with them or to tie it to a lower rate. Report that bank immediately, it is a $50,000 fine per occurrence.

I figured as such. Will certainly steer clear.

3) That 675 credit score is killing you. You will struggle to get a lower rate than 7% from anywhere that doesn't do manual underwriting with that score. I would imagine that your DTI and LTV ratio's are probably also out of wack, increasing the problem.

DTI is under 25% in entirety including all debts. LTV ratio I was told by the lender is at 95%. These both seemed like good numbers all things considered. The 675 I agree is my problem. Unfortunately not much I can do about it beyond wait for my length of credit history to increase.

4) Most mainline lending institutions will increase the rate with the age of the car, in addition to the term of the loan and the LTV. Many lenders won't even loan money on a car that is more than 8 years old, so that is also probably causing you a problem.

5) Doing a shorter term loan (less than 48mos), getting the LTV down below 80% with some cash, and using a manual underwriter will help you - but I would be surprised to see a rate lower than 6% based on what you have indicated in your post.

Honestly I would be happy with 6%, and do plan on paying it down quicker than the term. I will call my local CU to see what they can offer.

Much appreciated!
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      03-06-2019, 08:12 PM   #11
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Yeah rates are definitely on the climb and finding a bank to give you free money (below the inflation rate) will be difficult to impossible. In order to get anything under 4.5% right now you need to be above 750 credit rating and keep the term below 72 months. You can get something like 2.9 for a short term like 36 months. If you qualify, I’d check PenFed. They always have crazy teaser rates and do refi and “second chance” auto loans to lure your business.

Beyond that, you may just want to say now is not the time for an M3 financially, sell it private party, pay the difference owed and buy a cheapy car until you can turn things around. You could also consider an older 135i that would be almost as fun but way cheaper.
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      03-06-2019, 08:57 PM   #12
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Quote:
Originally Posted by MGM135is View Post
Yeah rates are definitely on the climb and finding a bank to give you free money (below the inflation rate) will be difficult to impossible. In order to get anything under 4.5% right now you need to be above 750 credit rating and keep the term below 72 months. You can get something like 2.9 for a short term like 36 months. If you qualify, I'd check PenFed. They always have crazy teaser rates and do refi and "second chance" auto loans to lure your business.

Beyond that, you may just want to say now is not the time for an M3 financially, sell it private party, pay the difference owed and buy a cheapy car until you can turn things around. You could also consider an older 135i that would be almost as fun but way cheaper.
I will definitely call up PenFed.

Just to clarify, I am not doing this to lower my payment, its to pay the loan off quicker. As stated previously, my car payment is about 6.5% of my monthly income. I can certainly afford it and have no intentions of selling the car, I just dont want to pay more interest than I have to.

Also, I have positive equity in the loan currently by about 3k.
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      03-06-2019, 09:38 PM   #13
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Check out Lightstream and Sofi. Very fair and easy to work with. Good luck.
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      03-07-2019, 12:14 AM   #14
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Check out Lightstream and Sofi. Very fair and easy to work with. Good luck.
I was also thinking of Lightstream with the age of the car.
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      03-07-2019, 06:20 PM   #15
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Called PenFed, unfortunately they denied my app due to limited credit history. At this point, the only real approval I have received is that 7.49%. I spoke with my representative over there who informed me again that GAP is a requirement or he will not be able to help. Gave me a 24 hour time frame to make my decision (LOL).

His high pressure sales tactics are evident, and certainly not ideal. I have held off on my decision with him, yet after receiving the denial from PenFed, his 7.49 rate is better than I have currently. Would it be a mistake to move forward?
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      03-07-2019, 06:23 PM   #16
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Quote:
Originally Posted by spazzyfry123 View Post
I was also thinking of Lightstream with the age of the car.
Lightstream is a fantastic lender, but unfortunately also couldn't help due to credit history. It's a shame that limited credit history is my issue, as it's something I can not change in a short period of time. I was informed that everything else on my application was in good standing, including LTV ratio, DTI ratio, income, no late payments, etc.
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      03-07-2019, 06:28 PM   #17
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Do you have someone (with more credit history) that is willing to cosign the lease with you? Read: trusts you enough to make your payments and will risk their credit score on it.

You could possibly get approved by lenders that are denying you and this will help you build your credit.
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      03-07-2019, 06:29 PM   #18
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Does your auto insurance provide GAP coverage that will satisfy the lender requirement?

If you have been building credit history for 4 years, the length of credit history shouldn't be such an impediment.
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      03-07-2019, 06:39 PM   #19
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Originally Posted by RickFLM4 View Post
Does your auto insurance provide GAP coverage that will satisfy the lender requirement?

If you have been building credit history for 4 years, the length of credit history shouldn't be such an impediment.
The issue is I started building credit 4 years ago, when I opened up cards, and put small balances on each month. About 6 months ago, I obtained the car loan which put my average age of accounts to just under 2 years.
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      03-09-2019, 06:03 AM   #20
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I'd say if you're adamant on keeping the car and the current payment is making up a minimal amount of your income... Just pay that thing down and drive the wheels off it.

What are the terms? 48 month loan or?
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      03-09-2019, 08:23 AM   #21
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Update: found a co -signer with stellar credit. PenFed reconsidered my app with the cosigner and approved me at 4.19%.

Thanks for the recommendation!
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      03-09-2019, 10:07 AM   #22
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Seems your story has been dressed up for the internet and/or you are not providing all the information.

675 is a terrible score and unlikely with what you say is 5 years of history and an income likely near $100K if your 6.5% pre tax story is true.

Bottom line, I don’t believe your story, but your credit is the problem.

Any person who has their head screwed on straight from a financial perspective as you convey would have never bought a car on 9.9% interest, period.

Not to be a hater, but there is more to this.
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