Car financing question!

LibertyUnites · #1 (**permalink**) 09-30-2009, 06:46 PM

I have recently become aware of a loan available to recently appointed Officers in the military through USAA ($25000 @ 4.99%) for which I am eligible.

I currently have two car loans:

(1) My truck I bought a few years back which cost $18k and I financed with a 60 month loan @ 7.74%. With interest the truck will cost me about $21800 when it's paid off here in a year or so.

(2) A car I bought for my wife earlier this year for just over $20k on a 72 month loan @ 7.29%. All told, that one will cost me over $25k with interest.

So my questions are: Is taking the lower interest rate $25k loan and using it to pay off my two current loans a good idea?

If I pay off a loan on a vehicle, would I just pay off the original dollar amount I bought the vehicle for, or am I also held responsible for interest they would have made off me?

My logic is that in taking a single, lower interest rate loan (about $470/month payments, if I'm not mistaken) and paying off two, more-expensive loans (I pay just over $700/month currently), I would save myself over $200/month.

I'm just worried that, like most things in life, this isn't as simple or easy as I am thinking it to be.

LibertyUnites · #2 (**permalink**) 10-06-2009, 10:41 AM

Awesome, thanks again to Brian for getting this post to show up!

TheCaptain · #3 (**permalink**) 10-08-2009, 01:28 AM

Liberty, there are a few things going on in your post if I understand correctly. First of all, you will need to look at the current loans that you have to see if there are prepayment penalties. Theoretically, you would just have to pay off the principal that is owed and not future interest if there is not a prepayment penalty.

Secondly, you are probably not going to be able to use the new car loan to pay off existing car loans. USAA is a great company, and generally gives better terms, but they do still operate under the same basic rules as other banks. Banks generally give better terms on deals for new cars than used cars and view refinancing as a different process than providing a new loan.

You should check directly with USAA and see if they are willing to extend this offer towards refinancing existing loans. Good luck.

LibertyUnites · #4 (**permalink**) 10-08-2009, 09:08 PM

Thanks Captain!

I didn't know about prepayment penalties, I'll have to give them a call tomorrow and ask.

As far as the USAA loan goes, it's not an auto loan... in fact, I'm not sure what category it falls under at all (personal, maybe?). I have talked with a representative, however, and told her my intentions. It's a special loan that they don't advertise and is only available to newly commissioned Officers in the military. I don't foresee any problems there, but I will ask specifically the next time I talk to them.

Thanks again!

sapphirecapital · #5 (**permalink**) 10-08-2009, 11:32 PM

go for it especially when it frees the cars from their loans, I believe the category loan is a personal one without lien but I could be wrong

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