If I buy a bike for, say, ~23,000 at 9% APR and $400/month for 72 months

then I try to refi and get quoted

~24,000 (10 day payoff) at 5.99% APR and $430/month for 72 months

is it better to stay at the first deal or should i refi for a smaller APR and a little higher payment?

These numbers are made up, but pattern is still the same. I've always went with the lower monthly payment in the past to keep things a little free-er financially, but I'm wondering whether the lower APR is better. Can someone give me some insight please?

 

Smaller interest amounts always better if you can swing it. Ends up paying less. Just make sure you get simple interest always. Don't want to pay penalties for early payoff

 

Avoid those steps and go with a credit union. Mine was 1.7%.

 

Your refi is asking for cash out because it has 1K more than the original loan. But even at 1K more, being 3% less is going to give you a lower payment not a higher one.

maybe you were talking about less than 72 months for the refi??

 

You have several things to consider. Obviously a lower interest rate means you will pay less for the use of the money over the term of the loan.

The first thing to consider is what type of loan is it? Is the interest only paid on the declining balance or is the contract a 'rule of 78's' contract where much of the interest is front end loaded. Lots of people borrow, using your made up number of 23K, pay for a while then find out they owe more than they borrowed due to type of contract.

Here is the bottom line. Regulation Z is a federal requirement that lenders must disclose to you the total of payments as well as the total finance charges. Get those numbers and see under which contract you pay the least.

Sometimes people are guided more by the monthly payment than the finance charge because of budgetary considerations. Only you can decide what is best for you.

Good luck with your decision.

 

Surprised a lender would do 72 months on a bike loan. The borrower will get upside down in a hurry and bike equity becomes a risk to the lender.
9%? walk away from that shyt.

 

Thanks for the feedback, guys. That helps a lot. OKMICK, I'll hit them up and get a copy of those numbers. Thanks again, everyone.

 

My simple rule for borrowing money...

Finance as little as possible, for no longer than you have to, at the smallest interest rate possible.

 

5 years is pushing it on a bike loan, you'll be upside down otherwise, and the added interest will suck.

If you can't put 20% down and pay it off in 5 years MAX, you can't afford it.

there are loan calculators all over the internet, look at the amortization table and how much you are paying in interest.

your first option has interest payments of $ 6,850.29

24K, 72 months, 5.99% APR interest of $ 4,629.79. The second option is best of the 2

 

Your numbers don't work. And the pattern is not the same unless you are taking into consideration the compounding/discounting of the interest and time value of money. (takes some more serious algebra)

Straight calculation though:
$23000 X 72 months @ 9.0% = $414.58 payment.
total of payments = $29,849.46

$24000 x 72 months @ 5.99 = $397.63 payment.
total of payments = $28,629.36

There is the actual calculations on the scenarios you provided. (caveat: 30 days to first payment and all payments made exactly on due date)

If you plan on paying it off early, the rebate method used by the finance source will make a difference. More so on the front end than later in the contract.

If have specific questions, just ask.