Can a loan save you money?

Ask about refinancing to reduce your payments or term

With high unemployment and the economy slow to recover, everyone could benefit by lowering their cost of debt.

But how do you avoid a car payment when you need to get to work? How do you cut your credit card bill if your wages aren't keeping up with the rising cost of living?

One solution: Take a closer look at your loans.

By refinancing high-cost debt at a lower rate and better terms, you could save money. In some cases, lots of money.

When Sean and Mellissa Mumey refinanced and consolidated their loans at STCU, they swept away thousands in high-priced debt and kept more money for themselves. Here’s how:

  • Refinanced a vehicle into a 2.99% annual percentage rate auto loan.
  • Paid off student loans, medical bills, and credit cards (some charging as much as 22 percent interest).
  • Paid off a $6,000 balance on a Home Depot card borrowed from a friend by transferring balances to a low-cost STCU Visa® credit card. (That friend was happy!)

Those changes reduced the Mumey's total consolidated debt payments from $900 per month to less than $700. In just one day.

When the Mumeys first visited STCU’s South Branch, they planned to merely open a checking account. But after reviewing their finances with loan officers Paul Swenson and Keith Appleton, the couple came away with a new outlook on their finances.

"These guys tag-teamed our situation," says Sean Mumey, a Spokane home remodeler. "That was simply the most amazing customer service we've ever

Is refinancing a home worth it?

Borrow $250,000 to buy a new home, with 7 percent interest over 30 years, and you’ll spend nearly $348,800 on interest charges alone—more than the house itself!

But refinance that same loan at STCU with, say, a 4.50 percent loan over 30 years, and you could reduce your total interest charges by $142,800. That’s enough savings to add a barn and a stable of horses. Or send a child to college.

To refinance a home loan of that size, you may need to spend $4,000 or more on closing costs and other fees. That’s why Monica Lloyd, sales manager of STCU Real Estate Services, suggests you refinance only if you plan to stay in the home long enough to recover your upfront costs.

In the example above, Lloyd says, the refinanced home loan would reduce your monthly payment by about $320. Divide the estimated $4,000 in closing costs and fees by your monthly savings to determine the minimum time needed to stay in your home and recover your upfront costs. Answer? At least 12.5 months, in this example.

Our members are losing it

The Mumeys' experience is not unique. Hundreds of STCU members have been losing their high-priced debt by refinancing loans they first got from banks
and finance companies.

During a 60-day period earlier this year, 180 borrowers from all walks of life sought STCU's help to cut their total cost of debt by a whopping $366,000—or $2,000 on average. With almost no effort, these members had STCU refinance more than $3 million in loans from other lenders, lowering their cost of debt by getting a better loan at the credit union.

"Those who ask about refinancing their debts, generally save money," says Patrick Garrity, STCU’s director of lending. "Those who don't ask, never do."

STCU cannot refinance every loan because of credit risks and other factors, Garrity says. But there are many loans the credit union can refinance at a lower rate to reduce your cost of debt and to help you pay off your loans faster.

Is refinancing a car worth it?

It typically costs nothing to refinance your vehicle when STCU “rescues” your loan from another lender and rewards you with a lower rate. That usually makes good sense since you will lower your monthly payment or pay your loan off faster, keeping more money for yourself.

For instance, if you originally financed a $30,000 car with an 8 percent, five-year loan, we could reduce your monthly payment by up to $60 every month!

By the end of the five-year term, you would have saved nearly $3,600 in interest charges just by refinancing at a lower rate. That’s enough money to buy 900 gallons of gasoline and drive a fuel-efficient vehicle once around the world!

Take a load off

Because purchases often begin with a dealer or finance company, you may be paying more for a loan than you should.

Sherrie and Jerry Boston of Chattaroy, Wash., purchased a recreational vehicle, with a loan from the dealer that was later sold to Bank of America. STCU loan originator Andrea Smith showed the Bostons how the credit union could pay off BofA and reduce their monthly payment by nearly $200!

"We're taking advantage of lower rates to get the RV paid off before retirement," Sherrie says. "We love to camp and travel. We want to see the United States without those debts following us around."

If you're thinking of refinancing, beware of lenders who advertise low rates, but slip in a fee to boost their profit on the deal. As a not-for-profit cooperative, STCU is different. We refinance most vehicle loans from other lenders at no charge. And there's no balance transfer to get our great credit card rate for the life of the balance.

The credit union even offers a no-cost home loan for those who want to lock in a low rate and pay off your home loan quickly. This 20-year fixed loan has a 10-year balloon and no closing costs, in most cases. See disclosures or contact an STCU loan officer at (509) 344-2966.

Starting a new business? Returning to college? Planning a vacation? Buying a car? Adding to your home? Or just trying to get ahead on your finances?

Whatever the goal, trade in your high-priced debt at STCU. Contact us today and save!