Auto refinance advice

[hdbrandon]

I understand this is not professional advice, but I'd like some opinions. I'm a 23 year old working part-time and a full-time undergraduate student.

I have a 2009 car, bought new with a 7.84% APR, and payments of $414.00 set to mature in 2014. I just manage to make these payments, especially in the winter months when my hours get reduced at work.

I'll be signing an apartment lease this year and am worried about managing both the rent and car payments.....on top of insurance, gas, groceries, etc.

I have a FICO score of 694 (accorinding to Experian $15 service).

Both Chase, WellsFargo, and CapitalOne have declined my auto refinance of just over $11,000 on the car.

I need advice as to what these lenders expect for credit scores/FICO scores to look like to lend. If I could lower my payments by even $50 to $100 I could rest much easier.

I do not have much debt and print my free credit reports from the big 3 yearly.

Good payment history on current car.
1 major credit card with a 1,600 limit, 1,300 used
1 credit card 1,000 limit, $0 balence
1 credit card $700, $0 balence
Plenty of government loans, but are all deferred so shouldnt matter.

(Hospital bill of $200)
(Bank bill of $300)
Neither of which appeared on the Experian report. But perhaps they do on TranUnion or EquiFax.

Would it be wise to close the $700 credit card? I have little to no use for it. What are some hints to lower my auto payments? Can I even expect a lower APR than 7.84% in todays market? Is it wise to trade-in the car for a new one, with a lower rate & longers payments-taking a lose on my trade-in?

Thank you.

[disneysteve]

Welcome. It sounds like you realize the car purchase was a mistake, hopefully one never to be repeated. Now what to do about it.

How much is the car worth today on the private market (not as a trade in)? You can check kbb.com for an estimate. How much do you currently owe?

I think you need to change your attitude about debt. You say you "do not have much debt" but then say you have "plenty of government loans." Just because they are currently deferred down't mean they don't count. They still represent obligations that you need to repay. A potential creditor would still see them on your record and take them into consideration before lending you more money.

Depending on the situation with the car, the advice will probably be to sell it and buy something cheap for cash. Get yourself on a written budget so that you can live within your means and avoid taking on any further debt.

[naomibatac]

I agree with disneysteve that you should make a budget so that you will know how much you have and how much you are spending. This will help you prioritize and avoid unnecessary purchases. I believe you don't have to close the card with $700, it may come handy in the future.

[Nightfly]

Are you upside down on the car? That is, do you owe more than it's worth? If not, you might want to sell it, pay off the loan, then get something less expensive that you can pay cash for. At the very least, consider buying another car on credit but with a much smaller loan amount. Trading in for a new car is not wise, even if the payments are lower and spread out longer. The depreciation kills you in the long run - don't do it. You've already taken a huge depreciation hit with the car you now have - at least your current car won't depreciate as rapidly as it has these past two years. Also, while around 8% APR isn't rock bottom; in today's tight credit market with your FICO under 700 you probably won't do any better on another car loan.

[riverwed070707]

Do you have any money in savings? The best way to lower your payment is to bring money to the table when you refi -- thus lowering your interest rate and the amount owed. If you don't have money in savings, I think that is a pretty strong indication that you need to sell the car and get something you can afford before you even think about getting your own place. Your car payment is expensive for any income, let alone a student one.

[dczech09]

Do not close the credit card account. Just simply do not use that card anymore.

Pay off that $1,300 credit card debt as soon as possible. How much do you have in student loans? "Plenty" does not give us any indication of how bad of a situation you're in.

Sell the car if you can. You're in WAY over your head with a car loan with a $400+ monthly payment until 2014. I would recommend someone making $40,000 a year to do the same.