Conference 7.286::dcu

I'm glad to see that DCU was able to give you such good service!

Bob

	Yes, I am another happy-camper.  I refinanced my present
	loan (14.8%) for DCU's 6.5%, and now have the luxury
	of automatic payment.

	thank you DCU!

My understanding is that this is simply a service that DCU buys from another
company - you can get the same through AAA.

What's amusing (sort of) to me is that my wife and I got two DIFFERENT DCU
mailings regarding the car sale.  Mine notified me of the sale and included
a form to request approval for a loan.  Hers included a certificate stating
that she was preapproved for up to $25K!  I'm puzzled as to why she rates
I and I don't (we both have about the same amount of money in DCU and our
credit records are both good.)

					Steve

    Steve, 
    
    Do you already have an Auto Loan out through DCU?  The same thing
    happened at my house.  I'm guessing that the program they used went and
    got the primary name on any outstanding DCU loans, those people got the
    forms with requests for approval.  Those of us who aren't listed as the
    primary borrower got the preapproval for up to $25k.  That's my guess
    on how they did it.
    
    Debbi

    Well, I'm the primary borrower on our car loan and I got a pre-approved
    loan letter. 

    Due to some VERY interesting demographic data usage by the DCU, I can
    not be notified of any of these special. I live in Connecticut and 
    wor/pay site/bank at HLO. I get no mailings on the Mass based specials
    [although 38 miles of the communte is in Mass thru Worcester] and none
    of the Connecticut specials because the DCU is Mass oriented.
    
    Guess I have to look for a deal somewhere else....
    
    Howard

    
      Yes, DCU and AAA had the same deal, dealers, and weekend. The AAA
    mailing told you how to interpret the secret price coding, so you
    didn't necessarily have to keep asking the sales people for the 
    special price.  Didn't by anything now, but its nice to know this
    is and hopefully be available in the future when its time.
    
               Mark

    I have a long-since-paid-off DCU car loan.  My wife has never had
    a DCU car loan.  Neither of us has any outstanding DCU loans
    (though we each have a DCU VISA card that is paid off in full each
    month.)
    
    					Steve

    I got the "you're approved for 25K" and asked if it could be used to
    refinance my two other vehicles which had loans totalling a little
    over $25K.  No problem.  That makes 3 vehicles that I now have through
    the DCU.
    
    ed

Be careful, though.  If your existing loans were much more than a year old,
you are actually losing money to refinance them - even if the new interest
rate is somewhat lower.  My wife got such an offer about a year ago (she
has a non-DCU car loan).  We worked through the figures and realized that,
due to amortization, she had already paid off most of the interest and
refinancing would just add a significant chunk of new interest to the loan.
Thanks but no thanks.

					Steve

Re: .10

To avoid this, don't take advantage of the lower payments and extended term of
the refinanced loan: go ahead and refinance at the lower interest rate, but
continue to make payments of the same size you did before.  The loan will be
paid off faster and you'll save on interest. 

    
    re: .11
    
        I'm not sure that the bigger payments would always "avoid" all the
    extra interest in all cases...The bottom line is everyone should know
    the interest left to pay on the old loan (with the old rate) and compare
    it to total interest on the new loan (with the new "lower" rate). If you
    plan to make bigger payments, yes, figure this into the equation as well.
    Unfortunately most people don't make the extra principal payments if they
    don't have to, but some do...
    
    /Charlie
                               

   >     I'm not sure that the bigger payments would always "avoid" all the
   > extra interest in all cases...
    
    Yes they will.  On ordinary auto loans and mortages, the amount of
    your payment that goes toward interest every month is the monthly
    interest rate times the remaining principal.  If you make the same
    size payment with a smaller interest rate, then more of your
    payment goes toward principal and you pay the new loan off even faster
    than you would have paid off the old loan, and pay less in interest
    each month, too.
    
    
    > The bottom line is everyone should know
    > the interest left to pay on the old loan (with the old rate) and compare
    > it to total interest on the new loan (with the new "lower" rate). 
    
    This is a good comparison if the payment periods are similar.  
    If the payment periods are differ, then this isn't accurate, because
    money that you pay today instead of next year doesn't earn you interest 
    from whatever way you'd invest it.  That's why banks are being deceptive
    when they cite the dollars of interest you save by paying bimonthly.
    You don't save as much as they say because the extra money that you
    pay early on your mortgage could be earning you money.  In fact, if
    by some chance you had an investment that paid you a higher interest
    rate than your mortage rate, you might lose money on a bimonthly!
    Of course I'm talking post-tax earnings, yet another complication.
    
    It's all very complicated, and it's a good approximation to just
    ignore all this stuff when doing your own analysis.  But I would
    never trust a financial professional who ignores these issues.
    
    	Enjoy,
    	Larry

    
    Thanks for clearing that up Larry. I'm not sure what I was thinking of,
    maybe a "Rule of 78's" loan (not an ordinary loan)?
    
    As far as the deceptive bank advertising goes, "If it sounds too good
    to be true, it probably is", seems to hold true once again.
    
    /Charlie 

	Does anybody even write Rule of 78s loans any more?  Everything I've 
ever had has been declining balance simple interest.  I love my current car
loan - 0%, 48 months. I had to laugh when DCU sent me the letter promising to
lower my monthly payments.

						--Doug

>>	Does anybody even write Rule of 78s loans any more?  Everything I've 
>> ever had has been declining balance simple interest.  I love my current car
>> loan - 0%, 48 months. 

I don't have any knowledge of other states, but in New Hampshire this 
type of loan is required by law.  I know that this is true for 
automobiles and I suspect it's true for other consumer loans.

//bruce

    Most welcome.  I never did figure out exactly what a "rule of 78's"
    loan was, except that it is a way to charge more than a simple 
    interest calculation would make you think.  That was enough for me.
    
    	Enjoy,
    	Larry

re: .16

� I don't have any knowledge of other states, but in New Hampshire this 
� type of loan is required by law.  I know that this is true for 
� automobiles and I suspect it's true for other consumer loans.

	I assume by "this type of loan" you mean declining balance simple
interest and not Rule of 78s.

					--Doug

Even with a declining balance simple interest, you still pay more of the
interest up front.  If your loan is more than a year old, you have to check to
see exactly how much you will be saving, and decide if it's really worth the
hassle to refinance.

Now our other credit union, IC Federal Credit Union, offered a $100 rebate to
refinance our car loan.  That almost made it worth the hassle.

Elaine

>>	I assume by "this type of loan" you mean declining balance simple
>>  interest and not Rule of 78s.

Yes, I do.  Sorry for the lack of clarity.

//bruce

    It's very simple.  If you have a no points, no closing cost loan, it
    always pays to refinance at a lower interest rate.  Whether what it
    pays is worth the paper work hassle depends upon the difference in the
    interest rates and the amount of the loan.
    
    If you must pay points and closing costs then it may or may not pay.
    Again, it depends on the loan amount and the interest rate
    differential.  The easiest way to calculate is to assume you will
    continue to make the same monthly payments and to borrow enough to
    cover the cost of the old loan plus the points and closing costs.  At
    some point the amount due on the new loan must be less than the old
    loan for the refinance to be a good deal.  The sooner the better.
    
    Loan interest is very simple to calculate.  Take the yearly percentage
    rate and divide by 12.  This is the monthly rate.  Multiply the monthly
    rate by the remaining balance round to the nearest penny, this is the
    monthly interest.  Subtract the monthly interest from monthly payment. 
    This is the principal payment.  Subtract the principal payment from the
    remaining balance to get the new remaining balance.  
    
    I've had several mortgages and have always been able to track them to
    the penny, even with various amounts of prepayment.  The same is true
    of the car loans I've had and my college loan.
    
                            August G. Reinig

Refinancing pays only if you maintain the existing length of the loan.  If
you move out the payoff date, you may lose.

			Steve

    Refinancing at a lower interest rate pays even if you move out the
    payoff date.  (Assuming a simple refinance with no points or closing
    costs).  The total amount you pay back may be greater than with the
    previous loan, but this extra cost is more than made up by what you
    earn on the difference between current payment and the lower refinanced
    payment.
    
    You can always earn the interest rate of the new loan by prepaying it.
    The new loan has a lower interest rate and starts with the same
    balance.  If you invest the difference in the payments by prepaying the
    new loan, you will pay off the new load before you would have paid off
    the old loan.  Thus, the refinance pays.
    
    However, you don't have to invest the difference this way.  You can
    choose some other form of investment.  You can even invest in pleasure
    by spending the money.  This doesn't change the fact that refinancing
    pays, it just changes the way that it pays back.  
    
    
                                August G. Reinig

    
  re:.23   >>>You can even invest in pleasure by spending the money
    
    
       I can just see myself telling my wife, "I didn't blow that money
       on a car stereo dear, I was mearly investing in pleasure..."
    
       Many :^)'s
    
       Charlie

    Ah, but if you told her, "I didn't blow that money on a new diamond
    necklace for you, I was investing in your pleasure." ...  There might
    even be some unexpected dividends! :^)s
    
                            August