Should I Refinance My Car Loan?

[KMC4]

Hello...I posted this in the After Discharge Forum but thought I might get more responses here since we're filing a Chapter 7...thx.


A little background......when we met with our attorney to sign our bankruptcy papers, both he and his Paralegal said that we should try to include our 2003 Ford Expedition (almost 70k miles) into the bankruptcy b/c we owed over $26k on it but it was worth only $8500. The montly payments were $612.98 and we still had 4 years left to pay (72 month term). We had never even thought of this option b/c we just assumed we'd keep the car. We were advised to try to purchase a new car (actually used) before we filed. We were told that our interest rate would probably be high but that in the end it would be better to get rid of the bad debt and get a newer car with less miles, etc. So that is what we did the next day. We purchased a 2007 Suzuki Vitara that had 22,7500 miles on it. Of course the APR was terrible (24.99%) but the monthly payments were less....$482 with a 60 month term. Our credit scores were both under 500.

My question now is what are our chances of ever refinancing this car loan? Would that be a good idea in this case or not? Or would it be better to just keep paying the loan as is?

Any advice is greatly appreciated.

[BassBoy]

You're going to hear/read different opinions here if it's more affordable or not, however here's what I did........and what you should do as well............

Yes, you can refinance the loan after your BK.....BUT.....I suggest you do so ONLY if your able to either shorten the term or make the term the number of months remainin when you refinanced. Also, check what fees are involved with the refinance.

For example......I refinanced with Wachovia after 15 payments with AmeriCredit (60 mo. loan), so I had 45 payments remaining, but the interest rate with Wachovia was so much lower with the refinance, that I did a 36 month refinance. Also, the only fee Wachovia charged was $15 for document and filing. I made a post about my refinance last year and I put down the numbers to show the savings, but it's been buried. Overall, I believe the savings was close to $3K.

Now, once you're able to refinance, pay extra on the loan if you can. My payments started out higher than I wanted, but when I refinanced, I kept making that orginal payment like I was still paying on the original loan. And of course if you run into a month with some unexpected expenses, you can make whatever the new minimum payment is with the refinance.

One other thing to remember.....if you're way upside down, most lenders won't refinance the loan. If I recall, you can borrow up to 110% of the vehicle's value (I believe that would be retail value). Considering how high your interest rate is, I can guess you won't pay much principle within the next year, so try to pay down the principle between now and then, if that's possible.