I have been really frustrated dealing with the credit union that issued my auto loan. Basically I've wanted to set up automated extra principal payments and been unable to do it despite multiple visits. It wouldn't be so annoying except that there's no online payment and to do it without automated payment I'd have to go in in person every time. I find it kind of hard to believe anyone's still operating this way, but here we are.

At any rate, I saw ads auto loans from a different lender for late-model used cars with the same interest rate I have. My down payment was substantial enough that the outstanding balance shouldn't exceed the current value of the car.

Would it be a crazy idea to attempt to refinance in these circumstances? I imagine I will lose some money to fees by doing this, but if they're not crazy that's acceptable to me.

If it matters I am in Massachusetts.

  • "to do it without automated payment I'd have to go in in person every time." What happens when you mail them a monthly check that's larger than the standard loan payment? – RonJohn Oct 22 '17 at 1:51
  • @RonJohn Probably the same thing that's been happening, that they apply it to my next payment and then tell me it's definitely fixed when I complain until it happens again. – Casey Oct 22 '17 at 1:51
  • It is not crazy at all and you might get a better deal then what you have now. I did the same sort of thing, but paid off the loan rater than refi it. If you can it works out the best for you. – Pete B. Oct 23 '17 at 14:23
  • @PeteB unfortunately the interest rate is pretty favorable so the best I can do is match it – Casey Oct 23 '17 at 14:24

I’d say No, it’s not crazy.

I did that even for a mortgage, because the bank tended to lose my checks or let them sit for some days, and then claim I paid late. They were known on the internet for their poor processing department, so I decided to avoid that monthly hassle with calling and arguing, and refinanced.

Compare the pain with the cost for refinancing, and if you think it’s worth it, change. You might even get a cheaper credit, and save on it.

  • I don't think OP's CU is losing his checks. – RonJohn Oct 22 '17 at 23:40
  • Wow. Fortunately I've been luckier with my mortgage. I'd be more nervous in that case given the huge fees and the way your servicer is constantly changing anyway. – Casey Oct 23 '17 at 14:25

What are the fees associated with changing the new loan? Are those fees worth the peace of mind? If so, than it is not "crazy".

The decision really boils down to that: is it worth the money that you will spend refinancing the loan to not have to deal with the original bank that financed your loan, assuming that you find an institution that will be more amenable to your financial expectations.

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    Sound enough. I guess I'm wondering if there is some disincentive to doing this besides the fees. – Casey Oct 22 '17 at 1:06

they apply it to my next payment

That's what my bank did with my auto loan. I got so far ahead that once I was able to skip a payment and use the money I would have sent the bank that month for something else. Still, though, I kept on paying extra, and eventually it was paid off faster than "normal".

EDIT: what does your loan agreement say is supposed to happen to extra payments?

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    Am I wrong in saying that I am paying more interest than I would otherwise be paying because they do this? – Casey Oct 22 '17 at 2:10
  • I don't think the loan agreement says anything about them. In principle it is possible to either make extra principal payments or apply to the next payment. What's more, their representatives keep telling me they can do what I've requested and I set up the extra payments with this understanding. Even if they're legally in the right I think you can imagine why this would leave me with a bad taste in my mouth. – Casey Oct 22 '17 at 2:15
  • @Casey "I think you can imagine" sure, and I'd never use them again! Still, I'd just keep on sending extra payments. – RonJohn Oct 22 '17 at 2:21
  • @Casey by your own calculations, when do you think you'll finish paying off the car? (I'd go back to the CU a few months before then and see how close their numbers match to yours.) – RonJohn Oct 22 '17 at 2:22
  • At least three years from now. Seems like a long time to wait. – Casey Oct 22 '17 at 2:26

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