About to purchase- Finance questions

[RoyBell]

Hey all, I have a downpayment on a new travel trailer and just sold my pop up last night. Thursday I will go to sign papers.

They were touting 4.99% finance rates until I got the deal. Then it jumped to 5.99%. I just purchased a car 2 months ago and my credit was 775 at that time. They pulled it Monday at the camper place and now it's 706. Big drop. I told him no way @ 6.99. He got it down to 5.99% which still seems high.

What should I expect? MSRP is $32K. Purchase price $20K I will be putting $10,000 cash down and financing $12,000 for roughly 10-12 years...whatever gives me the best rate, then I will pay down early.

I think with that kind of down payment I should be in the 3-4% range. Not sure what the deal is with my credit and the huge swing but hoping I can show the bank the rating from 2 months ago to help swing into a better rate.

Any thoughts? Either way the trailer will always be positive in equity.

Edit: I found a local credit union @ 4.24%. My score is lower than anticipated because my old car AND new car loan both show up. Old car should be off by now! The break over from Good to Excellent is 720 points. 720 is good for another .25% from the CU. Today the CU pulled it and it showed 710 (I did close some cards yesterday, maybe it helped?). So close.

[Vulcan_Rider]

RoyBell wrote:

It's BS.

It's not BS.
A huge part of your credit score is:
How much total "revolving" credit you have and what percentage of that remains unused. Closing a card or cards reduces your available credit and hurts your score....eventually. All of this stuff takes time to sift down through all of the filters.

[RoyBell]

smkettner wrote:

coolbreeze01 wrote:

RoyBell wrote:
(I did close some cards yesterday, maybe it helped?). So close.

I don't know anything about credit, but I've heard closing credit cards can have a negative effect on scores.

Anybody know?

Yes but it still depends on your situation.
Generally if your credit is excellent it will not drop enough to matter.

The score likes older accounts that are maybe used 10% or less of the max.

Close your 15 yr CC with $20,000 limit with $200 typical balance and keep your 2 yr CC with $5,000 limit of which $4,500 is revolving and your score will drop.

That's a good point. I have a couple cards with lower limits that are old for this exact reason. One is 10 years old that I don't use unless I need a small 0% money transfer for a short while.

[time2roll]

coolbreeze01 wrote:

RoyBell wrote:
(I did close some cards yesterday, maybe it helped?). So close.

I don't know anything about credit, but I've heard closing credit cards can have a negative effect on scores.

Anybody know?

Yes but it still depends on your situation.
Generally if your credit is excellent it will not drop enough to matter.

The score likes older accounts that are maybe used 10% or less of the max.

Close your 15 yr CC with $20,000 limit with $200 typical balance and keep your 2 yr CC with $5,000 limit of which $4,500 is revolving and your score will drop.

[RoyBell]

coolbreeze01 wrote:

RoyBell wrote:


(I did close some cards yesterday, maybe it helped?). So close.

I don't know anything about credit, but I've heard closing credit cards can have a negative effect on scores.

Anybody know?

It's BS. I have opened and closed about 10-12 cards in the last 2-3 years. I get the cards that have the most bonus points, charge the minimum (pay off each month), then cash out the points and close the card. Rate of return usually 15%. The deals are usually spend $3000-$5000 in 3 months, get $500-800 back.

Considering my credit score was around 715 when I checked 2 years ago (as it has been for the past 10+), and then 775 in March, I can safely assume that closing and opening of all those cards did not adversely affect my score. Call me crazy, but if you are going to charge stuff anyways (food, going out, home repair, etc), you might as well make the most on your return. At one point Chase gave me 3 of the same credit lol. Closed them all within 4 months of opening and then opened another and closed it.

[RoyBell]

rangerbait wrote:

RoyBell wrote:
I am not going to deplete my savings by buying cash. I am only 33 and rather have it in the bank.

What bank is giving you 5.99% interest? Damn, sign me up!

Read the whole thread, then read the post above the one you just posted.

[coolbreeze01]

RoyBell wrote:


(I did close some cards yesterday, maybe it helped?). So close.

I don't know anything about credit, but I've heard closing credit cards can have a negative effect on scores.

Anybody know?

[rangerbait]

RoyBell wrote:
I am not going to deplete my savings by buying cash. I am only 33 and rather have it in the bank.

What bank is giving you 5.99% interest? Damn, sign me up!

[RoyBell]

If you aren't making 8% on "real" investments, there's something wrong. Like wing_zealot above me said, long term. When stocks take a huge hit, you can invest while low and get quite a bit back when they do bounce back.

I currently have stock in Exelon (local power company), they usually stay around $33/share the last couple years. Current rate of return: Dividend Yield 3.68% This is pretty steady income and a solid return that I consider "safe"

I have a couple other dollars in Annaly Capital Management Inc. I believe it's a real estate investment stock. Current return: Dividend Yield 11.72%

I would consider that a higher risk because the rate of return is high and realestate is up and down.... But...none the less, combined they are 7.7% annually. These are my two biggest stocks and I just use scott trade so anyone can really do it.

If you pay someone to invest, your rate would surely be higher. My retirement fund is around 8-10% and I am not that aggressive (I need to call and change it).

Point being, if you can throw $12,000 into some simple stocks and gain 7%/year...over 6 years you will have $5000 at the end of 6 years.

If you run the loan out @ 4%, you it will cost you $1500 to borrow the money over the 6 years. Your net is $3,500 after you borrowed money. Still positive equity vs paying cash and not investing.

[nevadanick]

You have it figured out other than coming on here. I have the same score as you and bought 1 year old motorhome and it was less than 4%. You obviously do your homework for what you want and it will work out for you. Enjoy your new RV.

[wing_zealot]

Huntindog wrote:

wing_zealot wrote:

oakbowery wrote:
A few years ago I would have been in your shoes about financing ....

What are my shoes? You know nothing about me or my shoes. You choose cash, I'm happy for you. Using my money would be a stupid decision for me when I can use other peoples money for 4.45% while mine earns 7.66%.

How you handle your finances is totally up to you.

I just have one question. How are getting a bank to pay you 7.66% in todays low interest enviroment?
I and millions of others would really like to know the secret. That kind of return involves risk. Which means that you may or may not make that money. You may actually lose money.

You're risk adverse, I get it, I'm not. I have no problem with people investing their money some place that helps them sleep better at night. I need people like that to keep their money in the bank so I can borrow it at 4.45%. You get the safe return you require, I get the low rate I require, and the bank gets the spread. It's a win-win-win.

As for the secret, it's not really a secret anymore. it's long been known that over the long haul a S&P 500 index fund will return 8%± average annualized return. Yes some years I will lose money, I accept that. Some years I well make 15% or more, I accept that also.

My scenario is 100% real. I bought/financed my last camper just a little over 12 years ago. I paid 4.45%. Over the same exact 12 year period, my investment (the one I could have use to buy that camper with) returned 7.66%. I just one month ago paid that camper off, sold it, and bought a new one. Once again, a 12 year loan and I will not pay it off early. Even when I lose money on my investment for a year or two - I am always in it for the long haul. I do my research, choose carefully, go for long term, and stay with the plan. I don't recall exactly but I think the new loan is 4.49%.

[RoyBell]

rbpru wrote:
I am from the school that says you do not borrow money for toys. We are all one stroke of bad luck away from difficulty.

If you can get 7% on your investments portfolio with minimal risk, you are lucky. Many are closer to 5%.

We all have things that must be financed but I never considered toys among them.

Obviously there are others who simply do not want to wait. At least that is good for the economy. :W

What do you gain from this? You still spend money either way. The money just sits collecting dust until you have enough to buy something?

I always had a plan to spend while I was young. Once I hit 30s goal was to start saving. 40s...I would see how my 30s went. So far im only a year behind schedule.

My point being, 300-400 a month for a toy won't break me. I get to experience stuff that I otherwise wouldn't had. In my early 20s I had a hit car that I souped up and was a weekend drag racer. Lots of money spent. I'm glad i did it when I was young and money wasn't important. It was a great experience and met some great people. Had I waited I would of missed out on some great opportunities along my life time.

I value experiences over having a small amount of debt. I still pay an extra 15% toward my mortgage every month and auto withdraw 15% of my take home check to savings. That means any money left over I can send on toys 🙂

[rbpru]

I am from the school that says you do not borrow money for toys. We are all one stroke of bad luck away from difficulty.

If you can get 7% on your investments portfolio with minimal risk, you are lucky. Many are closer to 5%.

We all have things that must be financed but I never considered toys among them.

Obviously there are others who simply do not want to wait. At least that is good for the economy. :W

[RoyBell]

1.9% is crazy low.

[Black_Gold]

When we purchased our TT last summer, the dealer set us up with a local credit union @ 1.9% for 5 years. Our bank was somewhere in the neighborhood of 5-6%

[time2roll]

RoyBell wrote:
I just bought a car 2 months ago and used some of my free cash for that. I am not going to deplete my savings by buying cash. I am only 33 and rather have it in the bank.

Ask again what the minimum down and longest term can be to get a good rate.

Then make payments to have it gone in five years or less.

Your score will start to recover with a few car payments made... can you wait a month? Is DW's credit higher... have her sign. 706 is not top tier but you will be back soon to 775.

Check your credit union or bank for a better rate or just sign and go have some fun. 6% for an RV is not crazy high by any means.