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Refinancing Car Loan Guidance
LoneWolf
Brisbane, Queensland
418 posts
Hi,

Can someone enlighten me as to what exactly happens once I refinance a car loan?

Fictional Scenario : I bought a car with a $15,000 loan over 3 years. I am 2/3 the way through the loan. If I borrow back the $10,000 I have already paid, does that then mean that I owe the initial $15k but now only have a year to pay it back?

I don't want to ring the finance company until I understand how it all works.

Cheers.
04:58pm 26/05/09 Permalink
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04:58pm 26/05/09 Permalink
Spook
Brisbane, Queensland
25123 posts
no, if you borrow back the money, you setup a new loan:
05:03pm 26/05/09 Permalink
Syco
Brisbane, Queensland
178 posts
Yeah what he said. It's not so much re-financing, it's taking out a new loan that pays off the old basically.
05:03pm 26/05/09 Permalink
LoneWolf
Brisbane, Queensland
419 posts
So, in essence, I will have the repayments of the initial loan AND the repayments of the new one? Or do they roll it all into one?

Sorry, I'm a numbskull when it comes to this s***.
05:05pm 26/05/09 Permalink
reload!
Brisbane, Queensland
4574 posts
Well I would have thought the second loan would be taken out to completely pay out the first, hence erradicating one lot of repayments...
05:11pm 26/05/09 Permalink
Tollaz0r!
Brisbane, Queensland
9674 posts
The real question is:

Why on earth are you looking at getting another car loan after you have sunk $10,000 into a car less then 2 years ago? Surly a $15,000k should last you at least 6 or 7 years and them some if you look after it.
05:24pm 26/05/09 Permalink
taggs
Brisbane, Queensland
2589 posts
there are many different ways you can re-finance a loan, we'd probably need more information to help.

but in your fictional scenario it is likely that a new loan would be taken out to pay out the old one, and a new contract would be drawn up with a revised borrowing period.

don't EVER be afraid to speak to your financial institutions about these sorts of things. a simple phone call could save you a lot of time and effort.
05:25pm 26/05/09 Permalink
pic
Brisbane, Queensland
2206 posts
its not a hard concept. you had a 15k loan with bank a, you have 5k outstanding. if you refinance back to 15k with bank b you're essentially taking out a new loan for 15k, pocketing 10k and using 5k to repay bank a.
05:27pm 26/05/09 Permalink
euphoria
Gold Coast, Queensland
1189 posts
It's still a terrible idea with something that depreciates so quickly.

Pro tip: Save up and buy a car with cash.
05:32pm 26/05/09 Permalink
taggs
Brisbane, Queensland
2590 posts
^

oh yeah, i didn't even want to get into why borrowing against the equity of a loan for a depreciating asset isn't a good move financially. i assume he's doing it out of necessity reather than on a whim...
05:38pm 26/05/09 Permalink
Dodgymon
Brisbane, Queensland
1397 posts
why do it to yourself?
Also what car are you buying?
06:37pm 26/05/09 Permalink
nF
Forum Hero
Wynnum, Queensland
16011 posts
Why on earth are you looking at getting another car loan after you have sunk $10,000 into a car less then 2 years ago? Surly a $15,000k should last you at least 6 or 7 years and them some if you look after it.


Person crashes $15k car that's uninsured and causes $10k worth of damage.
06:38pm 26/05/09 Permalink
LoneWolf
Brisbane, Queensland
420 posts
No, I was hoping that I could refinance my car loan with the same lender, get the balance in cash and spend it on starting a small business. I haven't crashed the car, I don't have any debt (apart from this existing car loan.)

I was just weighing up my options is all. Thanks for all the answers anyway.
06:43pm 26/05/09 Permalink
3dee
Brisbane, Queensland
3556 posts
You wouldn't be getting a car loan since they'd ask you what its for. A car loan usually requires evidence of a car purchase...

You'd need some sorta personal/project loan or business venture thing or something.
06:50pm 26/05/09 Permalink
BigZub
Brisbane, Queensland
4974 posts
i could never justify getting a loan to buy a car... why not just save up for one? ... unless it was a business write off...
06:53pm 26/05/09 Permalink
3dee
Brisbane, Queensland
3557 posts
I never wanted to get one and luckily when I recently got my VT, my parents are in a position to fund a loan for what I didn't have. Pity that won't happen later in life :(

But I doubt they'll give you another car loan to make a business...
06:56pm 26/05/09 Permalink
reload!
Brisbane, Queensland
4575 posts
suhaib only rolls with cashhhhhhhhh
yeah people prolly take out car loans because catching the bus to work to earn the dollars sucks balls
06:58pm 26/05/09 Permalink
BigZub
Brisbane, Queensland
4976 posts
nah not really mate... i guess you can say i'm just a tightarse.. everyone is different.!


speaking of cars.. i really want the new R8 maloos..
07:02pm 26/05/09 Permalink
Spook
Brisbane, Queensland
25126 posts
i got a loan to buy a car that i wanted and ended up loving:
dont regret it for one second
07:08pm 26/05/09 Permalink
Hogfather
Cairns, Queensland
2835 posts
Easy credit is a shackle on the population :( The only way to free yourself of debt is to stop using credit!

The money you've spent on the car loan is dead and gone and there's no real way to leverage that for a new line of credit. Once the loan is repaid you get to list the car as an asset as security for a personal or business loan, but cars depreciate like mad and really don't count for much.

Any business that you can start for a few thousand you can save and start without debt if you think about it a bit more conservatively. Most startup businesses need energy and ambition more than they need cash to get going.

The #1 reason why small a business fails is a lack of enduring committment, its hard work with little reward. The truth is that you will probably lose interest in the business and let it die, so adding a debt to the equation doesn't make a lot of sense.
07:14pm 26/05/09 Permalink
shad
Brisbane, Queensland
2588 posts
No regrets for getting a loan for my mazda, got tired of fixing up my old crappy car. Smashed through the loan in 1 year and paid hardly any interest.
07:14pm 26/05/09 Permalink
pic
Brisbane, Queensland
2207 posts
i kinda like the idea of leasing a car, but it really only works out if you were gonna buy a new car anyway.
07:15pm 26/05/09 Permalink
Dodgymon
Brisbane, Queensland
1398 posts
I haven't crashed the car

You are walking a fine line with this quote.
Also I ain't ever leatting you live that down.
07:27pm 26/05/09 Permalink
tequila
Brisbane, Queensland
2271 posts
car loan is the worst way of borrowing money unless its for a new car
if its only 10k just put it on your mortgage if you have one

Pro tip: Save up and buy a car with cash.


doesn't work for everyone, its better for lots of people to get a loan or lease if its for a new car or car < 5 years old

car rates go anywhere from 8% to 22%
second hand car loans are in the higher range and for anyone who doesn't just blindly sign up for a car loan at a dealership - new car loan rates are in the lower percentile

if you go and buy a new car, don't finance it through the dealership - ever (unless its lexus who do interest free for selected models/clients)

if your $10k expense isnt for a new car, a personal loan rate will be better than a car rate


speaking of cars.. i really want the new R8 maloos..


No you dont :|

last year in September I was shopping around for a new ute and I had lined up the potentials

Navara, Hilux, R8, etc

walked into the nissan dealership, didn't fit in a navara - crossed it off the list
holden dealership - guy says the retail is like $63k and im like yer ok, made a quick phone call to my mate who works for Toyota on the southside

Asked if $63k was about right and he said f*** that, if i want one he can get it for more like 55k drive away but i shouldn't do it because it would be worth $38k after 12 months - no word of a lie

anyway as i got off the phone he goes "do you have a girlfriend? cause if you dont, you will have one when you buy this car"

wanker had slick black hair pulled back tight with too much gel in it etc
looked like a snake
i just left and went to the toyota dealership


last edited by tequila at 19:48:54 26/May/09
07:35pm 26/05/09 Permalink
3dee
Brisbane, Queensland
3558 posts
Save up and buy a car with cash.

Saving up is pretty hard to stick to for most people paying many bills and all kinds of living expenses. I often attempt to save up for expensive s*** and some stupid bill or personal expense will come along and wipe half of it away.

But also, you have to wait! And we can't have that...
07:40pm 26/05/09 Permalink
taggs
Brisbane, Queensland
2594 posts
if you can't save because any spare income is going towards bills (and only bills) then you don't have the money to afford it anyway.

more often than not, people who complain about s*** like that just can't delay gratification and find any excuse to justify it to themselves.
07:43pm 26/05/09 Permalink
3dee
Brisbane, Queensland
3559 posts
if you can't save because any spare income is going towards bills (and only bills) then you don't have the money to afford it anyway.

Well yeah, I often have a fair amount of cash left over each week to throw towards things, but once in a blue moon a big mofo will come along and wipe half my savings away.
07:49pm 26/05/09 Permalink
taggs
Brisbane, Queensland
2596 posts
oh, that wasn't directed at you personally. but budgeting is your friend :D
07:53pm 26/05/09 Permalink
mission
Brisbane, Queensland
5100 posts
walked into the nissan dealership, didn't fit in a navara


WTF are you like a giant or something?

We were also looking at new cars recently at went to a Holden dealership for a look (Zupps in Aspley) and the dude was as you described, typical Holden bogan. Hair all slicked back with sporty sunnies and quick talking.

Gah, I couldn't stand him and left.
08:09pm 26/05/09 Permalink
MatchFixer
Brisbane, Queensland
880 posts
Taking out a loan for a car is the worst investment you'll make in your life, right after taking a loan to pay for your marriage (read: divorce).
08:15pm 26/05/09 Permalink
mission
Brisbane, Queensland
5101 posts
Taking out a loan for a car is the worst investment you'll make in your life,


Yeah but it's not an investment?

Having a modern car has many advantages, the main one being safety.

Saving money at the expense of your own safety and your families... tough call? I would rather go into debt and have the safest car I can afford for myself and family than have an old s***** car potential death trap.

I don't think there is anything wrong with borrowing to buy a car as long as what you buy is reasonable and you can afford to make additional payments. Yes you are an idiot for buying an HSV instead of a Commodore, if your using borrowed money, they both do the same thing.

Wank ++

last edited by mission at 20:30:54 26/May/09
08:29pm 26/05/09 Permalink
tequila
Brisbane, Queensland
2272 posts
yeah I dont mind paying for a new car, I've never had such hassle free driving with a new modern diesel engine
plus, im getting 100% more K's per tank than previously

WTF are you like a giant or something?


navaras have s***** door trims on them and my knee didnt fit between the steering wheel and part of the door trim where the window up/down buttons are when I was changing gears (read coming on/off accel)
09:09pm 26/05/09 Permalink
Le C***
Brisbane, Queensland
5061 posts
I used to moonlight in one of the big banks in the personal loans section. That doesn't make me a guru by any means obviously, but...

No, I was hoping that I could refinance my car loan with the same lender, get the balance in cash and spend it on starting a small business.


You can't use personal loans for anything other than personal expenses. If you want to get a new loan to payoff the old one + give you more spare cash (that's how the refinancing will work) do not tell them you're using it for a business. Say you're going on an overseas holiday or need to pay bills or something like that. If they do investigate what you actually end up using the money for (pretty much a zero chance afaik) then you could get stung by them but very small chance.

For business loans, most bank sites will say a minimum of 50k or so, but if you actually go in and speak to the lending manager you can get whatever size but it's actually an overdraft facility moreso than a straight out loan. However the only way you can get it is if you have security for it. Even if you only want a 10k business loan and you own a 300k house outright, they will make you mortgage the entire house to cover the loan. It's pretty stupid. If your idea is solid then outlay the plan and see if a relative wants to help you out or something.

Any business that you can start for a few thousand you can save and start without debt if you think about it a bit more conservatively. Most startup businesses need energy and ambition more than they need cash to get going.


Never a truer word has been spoken. As I'm assuming this is your first business, the less money you start it with the better. You will make a lot of mistakes and have a massive learning curve over the first 2 years and having a large lump sum to begin with will only mean those mistakes are more costly.

Learning to watch where every cent is going and building your network is the real value of start a first small business. Once you've learnt the ropes through that experience you'll be in a position to know how to manage 'good' debt and expand or create larger businesses.

Starting a first small business with debt also means you're starting off on the backfoot, in negative territory. With no experience, no contacts, and large naivity, things are not in your favour. More generalisations here, excuse me if you're a gun at whatever it is you do.
09:38pm 26/05/09 Permalink
tequila
Brisbane, Queensland
2274 posts
pff they wouldn't care or even bother investigating him over $10k if he said it was for a car and he used it on a business

they dont care as long as they get their $$
i bought my unit as a home to live in and now its a rental, when a bank will almost always charge you an extra 1% interest if you borrow for an investment property

f*** them
09:58pm 26/05/09 Permalink
MrHardware
Brisbane, Queensland
4950 posts
i'm glad that so many people have the right idea
loans are the worst things ever
i've tried my hardest to make sure my mortgage is the only loan i have in my life
so far so good
and if you reckon you can't save up for a car then how the f*** are you going to be able to pay off a loan.
i've paid cash for every one of my cars. you might call them s***, i don't care, i bloody well own it and you're a slave to the man. i stick my money into appreciating assets not depreciating ones.

last edited by MrHardware at 22:52:51 26/May/09
10:49pm 26/05/09 Permalink
shad
Brisbane, Queensland
2589 posts
and if you reckon you can't save up for a car then how the f*** are you going to be able to pay off a loan.


It's not necessarily that you cant save up for the car. I just wanted it before I could save up the full amount of the car. The cost and the hassle of buying an intermediate car between my old one and my new one wasn't worth it to me.

Also my next loan will probably be for a house, and the security of having a new car that hopefully wont crap itself in the first 10 years of the home loan is reassuring.

last edited by shad at 23:07:26 26/May/09
11:05pm 26/05/09 Permalink
MrHardware
Brisbane, Queensland
4951 posts
i hear ya shad, and you're one of the rare people that uses credit exactly how it should be used - quickly and for a real, definite purpose. you probably actually saved yourself money that way.
but my point is in reference to the other 99% of people who get car loans - simply spending half a time again the purchase price of a depreciating asset simply because they're lazy or stupid or both.
11:08pm 26/05/09 Permalink
taggs
Brisbane, Queensland
2597 posts
loans are the worst things ever


couldn't disagree more. debt is probably the best way to create wealth for most individuals, it just has to be used correctly (which admittedly isn't very hard).
08:26am 27/05/09 Permalink
Spook
Brisbane, Queensland
25129 posts
loans are the worst things ever


couldn't disagree more. debt is probably the best way to create wealth for most individuals, it just has to be used correctly (which admittedly isn't very hard).


i agree 100% with taggs

i would have had a pretty miserable life missing out on stuff if i lived a no loan lifestyle;

heck, ive never purchased appliances with cash, its just so much easier to get them on interest free terms and make sure you pay them off before paying any interest
08:44am 27/05/09 Permalink
MrHardware
Brisbane, Queensland
4952 posts
the only thing i've not purchased with cash has been my house
i've saved more by people discounting for cash, let alone not having the cost of a loan

yes loans are handy, but misused 99% of the time.
08:47am 27/05/09 Permalink
paveway
Brisbane, Queensland
9794 posts
for some people it's easier to factor a loan repayment into your monthly cash flow than trying to save up $xx xxx amount of money with no real time limit, you might take some out here and there for whatever reason and it ends up taking forevs
08:48am 27/05/09 Permalink
taggs
Brisbane, Queensland
2598 posts
yes loans are handy, but misused 99% of the time.


one way of looking at it. another way is to say that someone like you values the consumption smoothing properties of debt less, so you are happy to increase the variance of your consumption *over time* to save money (or in other words, to increase future consumption). where as others would happily pay a price (the cost of the loan) to smooth their consumption patterns over time.

or so the theory goes anyway :)

edit: added *over time* in for clarification

last edited by taggs at 10:08:20 27/May/09
08:50am 27/05/09 Permalink
Merky007
Brisbane, Queensland
295 posts
I'm in pretty much the same boat. I'm trying to save up for a decent car, but most likely I wont have enough before my current one dies, or needs major repairs. So its pretty much keep saving, then get a loan to cover the rest of it.
09:08am 27/05/09 Permalink
tequila
Brisbane, Queensland
2275 posts
I'm just toy-oriented, if I had to save the amount of money I spend each month on my car loan .. I'd end up spending it next time I saw some rad toy I just had to have

knowing that the money has to be transferred to the bank each month makes it easier for me
I still have the car and I still had to put the money aside, it just goes to a bank instead of a savings account

I might pay an extra $5k (over 5 years) to do so, but for that 5 years I get the use of the vehicle
09:47am 27/05/09 Permalink
Spook
Brisbane, Queensland
25131 posts
I might pay an extra $5k (over 5 years) to do so, but for that 5 years I get the use of the vehicle


im quite happy to pay a similar price for hte convenience of having a nice car now, rather than catching the bus for 15 years to have a nice car in 15 years
10:05am 27/05/09 Permalink
paveway
Brisbane, Queensland
9796 posts
if only you had a nice car now spook
10:07am 27/05/09 Permalink
TicMan
Melbourne, Victoria
4641 posts
If I didn't have debt, I wouldn't work.. it's what gets me up in the morning!
10:10am 27/05/09 Permalink
3dee
Brisbane, Queensland
3563 posts
I just upgraded from a bomb VL which actually stopped working a few days after picking up my newer commo and that was luckily financed 2/3rds by my parents since i only had about 1/3rd of the money.

So its definitely not an easy thing to pass off getting a car loan because "its wrong". if you're car is about to blow up within the next month or two, then getting a car loan is prolly going to be a good decision.

But this isnt about getting car loans, its about getting a car loan to use in a business which is prolly not the best idea imo.
10:18am 27/05/09 Permalink
MrHardware
Brisbane, Queensland
4953 posts
yeah you're right taggs
i do see the outgo smoothing that happens with a loan, and the discipline forced upon you because of it, some people's weaknesses require it to survive
however it comes at such a great cost! and that's the part i can't believe so many can't see or choose to ignore. it's a pretty damn expensive convenience if you ask me, especially on a depreciating asset. all financial experts will refer to this as 'bad debt', and they're right.
10:56am 27/05/09 Permalink
paveway
Brisbane, Queensland
9797 posts
you can't exactly consider a penny pinching LPG fanboy's opinion as fair cross section though
10:58am 27/05/09 Permalink
DirtyApe
Brisbane, Queensland
634 posts
It's only money dude and you can't take it with you. Sure cars very rarely make you money but who f*****g cares? I know I prefer driving a nice car then when I was driving a s*** box. Don't listen to tight arses who worship the almighty dollar.
11:06am 27/05/09 Permalink
MrHardware
Brisbane, Queensland
4954 posts
yes you're right paveway. i do not represent a broad cross-section of society.
and dirtyape i'd rather worship the almighty dollar than be a slave to the bank.
and if it's only money and you can't take it with you, then you'll give me some, right?
haha

last edited by MrHardware at 11:31:26 27/May/09
11:11am 27/05/09 Permalink
DirtyApe
Brisbane, Queensland
635 posts
Hell no Mr Hardware I plan on spending every cent before I go. At the end of the day it is just debt and nothing special. Life is not a race to be richest man in the graveyard.
12:05pm 27/05/09 Permalink
MrHardware
Brisbane, Queensland
4956 posts
i intend on spending every cent before i go too. and i'm going to make the best use of it too, and not piss it away on making a bank rich.
12:09pm 27/05/09 Permalink
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