Refinancing my car took a bit of effort, but it was worth it to save over $2,700

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man sitting behind the wheel of a car
  • I had terrible credit for years. I was finally able to buy a car by cosigning with my dad.
  • I worked hard to raise my score and bought a new car on my own, but my interest rate was 10%.
  • Once I’d gotten my score up even more, I refinanced for a lower rate and lower monthly payments.

My credit has been terrible for most of my life, which meant that I could never even consider getting a reasonable loan on a new or used car. After getting sober in 2012 and getting my license back, I basically found $500 cars on Craigslist and drove them until they broke down. I’d deal with the stress of that until finding another beater car, and then I’d go through that cycle again.

Finally, I repaired my credit to a point where I was able to buy a car by cosigning with my dad. For two straight years, I never missed a payment on that car. After a couple of years, I was able to repair my credit enough to get another car without a cosigner.

I bought this new car right before the COVID-19 lockdowns; when the pandemic hit, I started working from home like millions of other Americans. Aside from not being able to drive it, I was paying way too much for the car and didn’t even realize it. 

I was able to get the car for about $23,000. Due to my credit score being in the mid-500s, I received a subprime loan with interest at 10%. I wanted the lowest payments possible, so I opted for an 84-month loan. 

By the time I paid the car off, it would have cost me over $9,000 in interest.

I worked hard to repair my credit — and it paid off

Last year, I went on a mission to repair my credit, and I’ve raised my score by over 100 points since. One of the best things I did was start reading books and educating myself about personal finance, and the best book I read was “I Will Teach You to be Rich” by Ramit Sethi. His book taught me so much.

Aside from helping me repair my credit, the book taught me that when buying a car, you need to prioritize a low interest rate. Most of us make the mistake of prioritizing monthly payments, but as you saw, interest was going to make my car cost $9,000 more than what I bought it for. Sethi also taught me what refinancing is, how it helps, and what incentivizes banks to do it.

My original lender had me over a barrel. I had a low credit score, so it was almost like they were doing me a favor by lending me the money, which meant they could charge me high interest. But when I fixed my credit, I had more options.

I actually wasn’t even considering refinancing at first. My dealership kept mailing me letters asking to buy back my car because, due to the global chip shortage and other factors, it was in high demand and had increased in value by thousands of dollars. But my salesperson was flaky, so I decided to just refinance instead of letting them buy back the vehicle.

My primary credit card is with Capital One, so I started doing research and found out they do auto loans. Since I’ve never missed a credit card payment and have been with them for years, I asked them about refinancing. Originally, they sent me a quote for 7.5% interest, but I knew I had leverage. I explained how I’ve been a loyal, responsible customer for years, and negotiated them down to 7.03% interest.

The original bank couldn’t match that, so I went through the process of refinancing with Capital One. To do this, there was a lot of paperwork emailed, notarized, and mailed back and forth, but it was worth it.

My car payments dropped from $450 per month to about $350, and I’m going to save $1,700 over the course of my loan.

I got money back after refinancing

One day, I received a check in the mail from my old lender for $486.76. I figured it was a mistake. A few weeks later, I received another check for $613.66. 

I figured this must be a mistake, too, and any day, they were going to call and ask for the money back. But after a Google search for “money back after refinancing,” I learned that since my car went up in value, there was positive equity that they had to pay me when my new bank bought out my loan.

After all was said and done, I saved money on my monthly payments and the overall loan, and I even made over $1,000. This was all due to educating myself on credit repair and the benefits of refinancing, and now I love sharing this knowledge with others.

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