Does It Make Sense To Refinance A Car Loan?

Q: I have a 98 Saturn SL2. My outstanding balance is around $9,000. I have a 60-month loan, and have made nearly 30 payments on it. (For those doing the math, I didn't put anything down, and also financed the sales tax.) Anyhow, my payment is $308 a month. I'd like to lower that payment because I am trying to get prequalified to buy my first house. How common is it to refinance a car loan? Would I do it with my current lender, or through another lender? Under what conditions/in what situation does it make sense to refinance a car loan? In my case, I'm not trying to refinance for a lower interest rate (currently I pay 7.75 percent), but for a lower monthly payment. I realize this would stretch the time to pay off the car, and result in more finance charges, but I'm trying to do anything I can to buy a decent house. (P.S. - Selling the car is not an option, as it has high mileage for the year, about 55K, so I'd lose money, not to mention a reliable car I need for my long commute.) Any advice appreciated.

A: -I would think that if the car payment (which isn't all that high) is what's between you and a decent house, you're probably not in a position to purchase a house. -I was in a similar situation once . . . I went to the credit union and asked to have the loan refinanced, and they did it for me right on the spot, no muss no fuss. Stretched the loan from something like 2 years to 4. Your lending institution may have similar policies . . . doesn't hurt to ask . . -Going to a new lender means financing a "used" car rather than a new one .. that generally means a significantly higher interest rate... and the allowable length of loan, depending on the lender, may not be any longer than 3 or 4 years. (you already have a 30 month loan to go) Will your current lender rewrite the loan at the same rate? Even if they do, how much would your payment drop? How tight are your other ratios for qualifying for that mortgage? Not all lenders use the same ratios. Any chance you can borrow from a 401K to pay down your loan so you can refinance a smaller balance? Do you belong to a credit union? Often credit unions will do things other lenders will not do.

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