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Refinancing Car & Skipping Payments

June 27th, 2012 at 04:32 pm

Last week, my credit union that I have my auto loan through, which is located in Idaho, sent me a letter saying that they would allow me to skip my July auto payment if I wanted to, with the exception of a $29 "processing fee". Normally, I would not do this. Obviously, this is just one way for them to make money. But hey, we could use the extra money to put toward our tires fund, which has plateaued at $241. And, we intend to pay the auto loan off with taxes this coming tax season (balance is currently $2,900).

Then, just yesterday, I got a letter from my current credit union (whom I have my checking, savings, and a credit card through). This letter stated that I was pre-qualified for a $20,000 auto loan, 60-months, no payments for 90 days, and at only 3.49%. Offer expires August 18th.

Just the offer itself is awesome, because it is a bit of a pat on the back to me for doing so well, when we have so little to work with.

So here is what I am going to do. I will skip the July payment (sans the $29 fee) with that credit union, then refinance the car through my current at the beginning of August, and skip three months of payments.

Like I said - normally, we would not do this. But the car desperately needs tires. I think it's a pretty good deal. And most of all, I am proud of my credit score. Smile

8 Responses to “Refinancing Car & Skipping Payments”

  1. snafu Says:

    Is there a fee for re-financing your auto loan from the Idaho CU to your current CU? Can the paperwork be completed by July 5th? I am guessing there is a couple of days 'grace' since there is a major holiday. Having a lower interest rate is good but you need to know whether/what fees and interest costs will be added to the loan balance as a result of the transfer and 90 day no payment period.

    Have you researched the cost of adequate tires for your vehicle? I suggest you check with wreckers in your area as they often have excellent tires at cut rate cost.

    If you can make even one payment directly to the principal over the 90 days you will have made progress in debt reduction. I know you plan to clear the $ 2,900. but often life's challenges get between us and our best intentions.

  2. Frgal Says:

    Why by July 5th?

    And no, there are no fees for the 90-day no-payment period, and no fees on transfers. There is a 0.50% increase for those who do not wish to enroll in automatic payments, however, which may be something that will effect me.

    I have researched the costs, and the cheapest tires that I am willing to get are around $430 after installation costs. I don't want to get a tire that is below 600 UTQG rating, and the tire I am looking at has a 700 rating, and is cheaper than those with a lower rating, and has a great warranty and reviews.

    And before even signing up for the refinance, I will be speaking with someone at my credit union to be sure that there are no hidden fees. The small print is all lined out pretty well in the online review process, so I am not worried. But I will be making sure. Heck, my credit union is literally only five stories down, and one-hundred yards south from me. Smile

  3. ceejay74 Says:

    Sounds like a good plan, considering you guys are in kind of dire straits. I would just strongly advise you to RESIST the temptation to use that extra cash flow for anything but tires and savings and catching up on other bills. The second you use it to buy a toy or a latte, it stops being a good plan.

    Best wishes!

  4. Frgal Says:

    Oh boy, don't I know it, ceejay! We have already spoken about that. The only other thing we would use it on is needed clothing (underwear, etc.) and savings (seeing as how the EF is not quite where I want it to be). Smile

  5. ceejay74 Says:

    Underwear definitely counts as a necessity. Wink

  6. Jerry Says:

    If you are in a situation where the money will lead to something important (like the tires... or, yeah, underpants Smile ) then it makes sense. Sometimes having the insurance of available cash for the short term can make a big difference, and it's not like it is every single month.

  7. Frgal Says:

    We did just that, Jerry.

    We got our tires (for $20 less than we thought it would end up being). The Goodyear shop did not try to sell us crap, unlike the Goodyear shop has back where we are from. They simply asked if I wanted anything additional. Since the previous tires wore perfectly (surprising for a rebuilt vehicle!), we opted out for any additional services.

  8. snafu Says:

    Sadly, offering a link after purchase but other readers might place importance on the failed UTQG rating. UTQG was created to give consumers a tire buying standard but failed miserably. The manufacturers set their own standards, there is no uniformity no matter the acronym.

    Buyer-be-ware remains the main factor in buying tire for your vehicle.

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