Common car refinancing mistakes to avoid Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial choices by providing you with interactive financial calculators and tools as well as publishing reliable and original content. We also allow users to conduct research and evaluate information for no cost to help you make informed financial decisions. Bankrate has partnerships with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are advertised on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including for instance, the sequence in which they appear within the listing categories, except where prohibited by law. This applies to our loan products, such as mortgages and home equity and other home loan products. However, this compensation will have no impact on the information we provide, or the reviews that you read on this site. We do not include the universe of companies or financial deals that might be open to you. Tom Werner/Getty Images

3 minutes read. Published 24 February 2023

Writer: Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers in navigating the ins and outs of securely borrowing money to buy cars. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are committed to helping readers gain confidence to manage their finances with clear, well-researched facts that break down complicated subjects into digestible pieces. The Bankrate promises

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If you have questions about money. Bankrate has the answers. Our experts have helped you understand your finances for more than four years. We continually strive to give consumers the professional guidance and the tools necessary to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our information is trustworthy and accurate. Our award-winning editors, reporters and editors create honest and accurate content to help you make the right financial decisions. Our content produced by our editorial team is truthful, impartial and uninfluenced by our advertisers. We’re honest regarding how we’re able to bring quality content, competitive rates and useful tools for you , by describing how we earn money. is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the placement of sponsored products or services, or by you clicking on specific links on our site. This compensation could affect the way, location and in what order products appear in listing categories, except where prohibited by law. We also offer mortgage or home equity products, as well as other home lending products. Other factors, such as our own website rules and whether the product is available within the area you reside in or is within your own personal credit score may also influence the manner in which products are featured on this website. We strive to offer a wide range offers, Bankrate does not include details about every financial or credit product or service. If you are having trouble making your current loan payments, — replacing your current auto loan with a new one an excellent option to save money while you keep driving your car. However, there are some typical mistakes to avoid in order to ensure you don’t find yourself in yet another precarious financial spot. The top seven mistakes in refinancing your car Avoid these common traps when refinancing your vehicle loan. 1. Do not check refinancing requirements. Lenders are strict in refinancing. Keep an eye out for requirements pertaining to the car’s age, miles and even the amount left in the loan. For example, lenders often will require a minimum of six months paid on the loan and a balance of between $3,000 and $5,000 to refinance. Bankrate tip

You can find refinancing requirements from banks’ websites as well as Bankrate’s .

2. Not checking with your current lender first . While your current lender might not offer the most competitive rates, it is still the best place to begin. Before exploring refinancing options outside the current lender It is recommended to contact them and explain your situation to determine if they are able to help. Certain lenders provide this service , which alters the terms, the due date for payments or interest rate , to give borrowers financial relief. Tips from Bankrate

Even if you don’t follow through with refinancing your loan, it is possible that they’ll offer an offer that is better than what a new lender might.

3. Extending your loan time too much. Refinancing is a way to cut costs, but if you extend your loan excessively, you could spend more over the loan’s life. While it could mean lower monthly payments, you will also pay more interest. Tips from Bankrate

Prior to term adjustment make use of an auto refinance to ensure you save money.

4. Do not take your credit into consideration As with most cases regarding finance, credit is used as the main determinant for approval. So, work to improve prior to refinancing your loan. You’re more likely to get the loan you want and leave with an improved loan overall. A credit score of 670 or greater usually qualifies for borrowers with the best interest rates. Tips from Bankrate

Check your credit ahead of loan applications by using

5. Shopping with just one lender Just as you would when shopping for your initial auto loan, we recommend comparing at least three lenders. While deciding on the first loan offer might be tempting, not all options are all created equal. The lower the interest rate, the more you’ll save on your car payment. You want to ensure you’re getting the best deal that is available. Tip for banks

Compare the rates currently that are offered by a variety of lenders. Pay close attention to the conditions for approval, the repayment options, and how it compares to your current loan.

6. Being upside down on your loan Before refinancing, make sure you know where the equity of your vehicle is by comparing it to an . Equity is the amount at which the value of your vehicle is greater than the amount you have to pay to the car loan. If you owe more than your car is worth, or hold negative equity refinancing your loan is probably not the best choice. Tips from Bankrate

Don’t refinance a vehicle you’re not able to pay for. Find out where you may be overextending and calculate expected costs prior to signing the new loan.

7. Giving up after your first rejection Auto loan refinancing guidelines differ between lender to lender, so even if you’ve been denied by one lender doesn’t mean you’ll be rejected by all. If you’re wondering, “Why can’t I refinance my car?” you have the right to ask the lender in accordance with the (ECOA). They have to explain why your application was denied. Bankrate tip

Knowing the reason you were rejected will help improve your chances of being approved later on. For example, if your credit score is low, you can work towards improving it before applying again.

The bottom line: While refinancing your car loan is not without risk It is an excellent way to lower your monthly cost and continue financing your vehicle. Keep these common mistakes in mind and stay up-to-date with current information so that you can walk away with the most suitable loan to meet your needs.


Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers in navigating the details of borrowing money to purchase an automobile. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are passionate about helping readers gain confidence to manage their finances by providing clear, well-researched information that breaks down complex topics into manageable bites.

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