As I’ve spoken about before, part of my annual budget is to pick a handful of expenses each year and see what I can do to reduce them. Sometimes this takes a fair amount of work and research as was the case with the mortgage refinance. But ironically, this next one came from an unlikely source: Junk mail.
A local credit union had sent me a “pre-approval” notice for an auto loan refinance. I guess in terms of refinancing – when it rains, it pours.
So what grabbed my attention about this particular letter? How about an interest rate of 2.25%!
2.25% sounded like a steal compared to the 4.59% I was currently paying. On top of that, the car payment had already long been on my radar of bills to try to reduce – I just wasn’t sure how I was going to do it.
Was this deal really going to help me? There must be some sort of catch, right? Or maybe there would be thousands of dollars in closing costs? Some really short loan term like 12 months?
Yes, I was a little pessimistic. But I also felt like one phone call couldn’t hurt to look into it further …
Too Legit to Quit:
As it turns out, the offer was completely legitimate. The 2.25% was for any loan term up to 6 years and pending a good credit score (of course!) The credit union itself was a reputable, locally owned business in our area.
Were the closing costs extreme? Nope. Just $15 for the title transfer.
Were there any ridiculous checking accounts I had to open with thousands of dollars in balances to maintain? Well, yes, you did have to open an account … with an opening balance of $5.
All-and-all, there wasn’t a whole lot to left to question or complain about. It was time to seize the opportunity!
My New Payment:
So for basically pretty minimal effort, here is what I ended up saving altogether:
• Monthly payment of $421.77 (down from my previous payment of $450.84)
• Interest on the loan of $902.84 (down from the $1,872.08 I had left on my previous loan)
• 48 month term (up from the 47 payments I had left to go).
It Pays to Look Around:
Every single one of my expense reductions all starts the same way – I take a step back and say “Could I be paying less for that?” From the mortgage payment to the car loan, to other expenses I’ve knocked down like my TV, phone, auto insurance, etc. They all started with a simple curiosity about what other offers there are out there and whether or not I could be doing better.
In the case of the auto loan, I was extremely delighted to find out that one simple visit to a credit union was going to drop my monthly payment by $30. You have to understand that was is going on right now with interest rates is pretty unique and may not stay this way forever. Even if you’re not thinking about refinancing your house or car, I strongly encourage you to take a look and see what deals are being offered. Strike while the iron is hot!
Readers: What simple actions have you taken to reduce your monthly expenses? Do you have a plan to tackle certain parts of your budget regularly? Has anyone else recently taken advantage of an auto and/or home refinance? I’d love to hear you share!
Related Posts:
1) Which Is Better – Paying Down Your Auto Loan or Mortgage?
3) How to Budget – Introduction
It is amazing what you find when you look around isn’t it?
I’m part of a credit union and they really do have some great deals. Although they do not always beat the market in terms of what’s out there, but many times they do.
Shopping around and running the numbers is critical to know if you are getting a good deal. Glad you were able to reduce the total interest expense! 🙂
Thanks! I really couldn’t believe how easy it was and how much it dropped the monthly payment. I was considering using some of my savings to pay down the principle debt. But at 2.25%, I would be better off using the money to invest in dividend stocks paying a 3% dividend!
I paid off loans for my both cars, something i did regret at first as it hurt my credit score. On other hand if i wouldn’t my monthly expsneses would stretch my monthly income after we signed up for the mortgage for our home. So it seems like it was balanced at the end. Now my biggest objective is getting rid of mortgage insurance, and that’s simply paying off up to %20 of the home apprisal, once done, I will be paying around $800 less/mo.
Alik: I know how you feel about PMI. I also have it as well. With my recent appraisal of $137K and a mortgage balance of $142K, there is no chance of me ever eliminating it anytime soon. Mine only costs around $80/month. Is yours really $800/month?
Talk about spring cleaning your auto loan! I thought my auto loan refinance at 3.49% (down from 5.75%) was good, but 2.25% interest rate is a steal. Definitely worth the $15 and checking account in my opinion. Lowering your monthly payment and saving half the amount of interest is a big win. Imagine how much quicker it would be paid down if you kept paying the original $450.84 too. Either way, smart move on your part!
Definitely! I was really LUCKY to have this one literally fall into my lap. Your 3.49% is still a pretty good rate. Any lower, and we’ll be practically borrowing the money for nothing!