AP NEWS

Veteran wants to refinance 20 percent car loan: Money Matters

August 8, 2018

Veteran wants to refinance 20 percent car loan: Money Matters

Q: I’m a veteran with a service-connected disability. For the past year, I’ve been re-establishing credit. Last November, I obtained a subprime car loan at an interest rate of more than 20 percent. Prior to that, I couldn’t qualify for anything. Then I obtained one of those high-interest credit cards. This summer, after I’d started establishing credit, I was able to buy a house with a VA guaranteed loan.  

Immediately afterward, I tried to refinance that car loan through a credit union, but I was denied. Apparently my credit scores took a hit as a result of high inquiries which occurred while applying for mortgages before I got my loan through the VA. Now my mortgage and new Walmart credit card are being reported to the credit bureaus. My credit score has crept back to about 690.

So when would be a good time to try car refinancing?

J.M., Cleveland

A: You’re wise to want to refinance your car loan. Rates on used cars right now are generally below 6 percent. You’re paying 20 percent. Wow! However, you do need to make sure that there is no prepayment penalty if you refinance your car loan within one year or two years or three years or whatever. It will be on your loan agreement.

If there’s a prepayment penalty, you’d need to calculate whether the charge would be outweighed by the amount you’d save with a lower rate.

Good job on getting your credit re-established. A 690 credit score -- if it’s on a FICO scale with 850 being the highest possible score -- is pretty decent. It’s like a B to B-plus. You should be able to get a car loan refinanced. (Many credit cards provide customers with their credit scores every month. These can be useful, but they’re not always FICO scores and not always on an 850 scale. Some have a top score of 900 or 990, so a 690 wouldn’t be so good.)

I think you ran into problems when you blanketed potential lenders with applications. Loan and credit card applications are one of those things where you don’t increase your chances by having a lot of them. Lenders view a slew of inquiries as a sign of desperation and are less likely to approve any. And, as you saw, your score takes a hit.

The next time you approach refinancing your car loan, I’d do a little advance work. Don’t just start putting in applications. First, I’d contact your existing bank, where you have deposit accounts. Talk to someone in person about your situation and see whether they believe they could refinance your car loan if all of the information you’re giving them is correct. Do that before you submit a formal application.

Another option would be Pentagon Federal Credit Union or USAA, both of which are friendly toward retired military personnel. Same thing: Call and get to someone in customer service. Explain your situation with just the basic details, not your life story. Ask whether they think it would be likely you could get your car loan refinanced. If you apply to two places and get turned down, I’d give it a rest for six months to a year.

Q: I placed credit freezes with the three major credit bureaus last year. I have not checked my credit reports since. If I do a written request, will I be required to list my PIN? Not sure if this is safe or not. Also, is it possible to request my report online now, or will I have to give my PIN for that method, as well?

C.T., Cleveland

A: You do not need your PIN to request a copy of your own report. The PIN is needed only when you want to thaw or unfreeze (temporarily or permanently) your credit file for a potential lender to view. Similarly, creditors with an existing relationship with you can still view your file, even if it’s frozen.

AP RADIO
Update hourly