Hey everyone! I hope the fall season is treating you well and you have not overdosed on pumpkin flavored options flooding the market. Today we have a special guest today, Patty Moore from @WorkMomLife.
Patty and I had an interesting conversation a while back. In real estate, we talk about refinancing to lower monthly payments through lower interest rates and resetting the amortization schedule. We also use refinancing to pull cash out of a property.
Patty brought up a great point during our discussion. Homes are not the only thing that you can refinance. Her refinancing tips may save you hundreds or thousands of dollars on interest payments, lower your monthly debt obligations, and improve your chances to qualify for a real estate loan.
Without further ado, take it a away Patty…..
Did You Know You Can Refinance Almost Anything?!?
By Patty Moore, a blogger working to grow inside and out. Patty blogs about her career, family, and finances. Follower her on Twitter @WorkMomLife.
With the recent increases in the Federal Reserve’s short-term rate and the Treasury 10-year note, all eyes are on mortgage rates to determine if this might be the last, best time to refinance. Generally, it’s always a good time to refinance if you can lower your interest costs. That not only includes mortgages, it includes just about any type of debt that be made less expensive through refinancing, such as student loan debt, credit card debt and auto loan debt. The good news is, despite earlier predictions that the Fed rate increase would drive interest rates higher, they have actually remained fairly steady and some loan rates have actually come back down. So, there is still an opportunity to lower your interest costs on whatever type of loan you might have.
Student Loan Refinancing
There is no debt more stifling than student loan debt, which, at average of more than $30,000 per borrower, is a significant burden for more than 40 million Americans. The average monthly student loan payment for borrowers aged 20 to 30 years is $351, which is enough to keep many of them from being able to afford the common trappings of post-graduate life, such as homeownership. Most are forced into postponing saving for retirement, which will become a threat to their future financial security. That is all the more reason to consider refinancing your student loan.
Student loan refinancing is available through private lenders who will consolidate any number of your federal and private student loans into one new loan with a loan term of five to 20 years. Many lenders only offer variable loan rates, which may be risky unless you are able to pay your loan off within a few years. Although the rate can start out lower than a fixed rate, if interest rates increase, as they are expected to, your monthly payment will increase. An increasing number of newer lenders, especially the online lenders, do offer fixed rates, which can still reduce your monthly payments and interest costs.
For the most credit worthy borrowers, student loan refinancing rates can be found in the low three percent range, which could lower your monthly payments and dramatically reduce your total interest costs. As of October 1, 2017, SoFi, one of the fastest growing private student loan lenders, is offering a rate of 3.35 percent for a five year loan. Its best rate for a 10-year loan is 4.375 percent, which would generate a monthly payment of $206, just $16 higher than the $190 payment on the four federal loans. That would result in total interest cost savings of more than $3,700. As with most of the more competitive lenders, there are no charges for an application, origination or prepayment fees.
Credit Card Refinancing
Your credit cards will be much more sensitive to any increase in interest rates. If you are paying rates that are around the national average of 15.59 percent, you might consider refinancing that debt with less expensive debt that can be found with a personal loan. Right now, several online lenders are offering fixed rate, unsecured personal loans with rates as low as 5.99 percent. Of course, you would need to have stellar credit to capture a rate that low.
Consumers with excellent credit (720 and above) frequently see rates between 6% and 10% which is significantly lower than credit card rates and competitive with other methods of financing. But even if you are able to qualify based on better than average credit, you could reduce your credit card rate by two to three points, which would result in significant interest cost savings over the term of the loan.
The advantage of using a personal loan to refinance credit card debt is that everything is fixed – the interest rate, the payment and the loan term – so you can actually target a debt payoff date. The key is to focus on debt payoff and avoid adding any credit card debt during the loan term; otherwise you will only compound your debt problem.
Auto Loan Refinancing
Chances are, since you financed your last car purchase, auto loan rates have increased, not decreased. So, why would it make sense to refinance your auto loan? It wouldn’t unless you were able to lower your interest costs. But, there could be a number of reasons why you could score a lower rate today than the day you purchased your car:
You improved your credit score. If you bought your car when your credit score was lower than it is today, you could probably qualify for a lower rate.
You took out a long-term loan. If you opted for a loan of more than 60 months as a way to keep your monthly payments loan, you might be able to lower your rate substantially, be refinancing into a shorter term loan. Auto lenders reserve their lowest rates for loans with the shortest terms.
You settled for a dealer-sourced auto loan. If you financed your car through a dealer without shopping around, you might be able to find a lender offering more competitive rates. Online auto lenders have become extremely competitive and, if you have good to excellent credit, chances are you can still find a rate that is lower than your dealer’s rate.
The most competitive auto lenders offer auto loan refinancing at the same rates as new car financing. There may be some restrictions on the age of the car, but if it is less than four years old, it should be able to qualify for late model or new car rates.
Lowering your auto loan rate a few points isn’t likely to reduce your monthly payment a whole lot, but it can save you quite a bit in interest costs over the term of the loan. For example, if you have four years remaining on a five year loan for $25,000 with a 7.75 percent interest rate, you could lower your monthly payment by $28 and save nearly $1,400 in interest costs by refinancing into a 4.75 percent loan.