What to know about cash-back auto refinancing Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators as well as publishing original and impartial content. We also allow users to conduct research and compare information for free to help you make financial decisions with confidence. Bankrate has agreements with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this site are from companies that compensate us. This compensation may impact how and when products are featured on this site, including for instance, the sequence in which they appear within the listing categories and other categories, unless prohibited by law. Our mortgage or home equity products, as well as other home lending products. But this compensation does have no impact on the content we publish or the reviews that appear on this website. We do not include the universe of companies or financial offers that may be accessible to you. Georgijevic/Getty Images

4 minutes read. Published August 22, 2022

Written by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers to navigate 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 editing and writing for Bankrate since late 2021. They are committed to helping readers gain the confidence to control their finances with concise, well-researched and well-documented information that breaks down complicated topics into bite-sized pieces. The Bankrate promises

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If you have questions about money. Bankrate can help. Our experts have helped you understand your money for over four decades. We continually strive to provide our readers with the professional advice and tools needed to make it through life’s financial journey. Bankrate follows a strict standard of conduct, so you can rest assured that our content is truthful and accurate. Our award-winning editors and reporters provide honest and trustworthy information to assist you in making the best financial choices. The content created by our editorial team is objective, factual, and not influenced by our advertisers. We’re transparent about the ways we’re in a position to provide quality information, competitive rates and useful tools to our customers by revealing how we earn money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services, or through you clicking certain hyperlinks on our website. Therefore, this compensation may affect the way, location and when products appear in listing categories, except where the law prohibits it for our mortgage or home equity products, as well as other home loan products. Other factors, like our own proprietary website rules and whether a product is available within your region or within your own personal credit score could also affect how and where products appear on this website. While we strive to provide the most diverse selection of products, Bankrate does not include details about each credit or financial item or product. Cash-back is similar to a cash-back in the sense you can apply for newterms that are more favorable to take over your current loan. But, along with that you’ll also receive the cash lump-sum in the refinance. The amount you get is contingent on the equity that is present in your vehicle. Car owners may consider this type of refinance if they’re in dire need of funds for an emergency, but this method comes with the potential of increasing the debt burden for the borrower. What is cash-back auto refinancing? Cash-back Auto loan refinance permits you to modify the current loan and refinance to an amount greater than what you owe, and receive the extra money in cash. This type of loan is usually used by those who need additional funds. This process is a way to take what you can get from your vehicle and converts it into cash you can take home. This means that while you are refinancing your current loan to new terms, you’ll receive additional funds in cash when you borrow more than the actual value of the vehicle. There are not all lenders that offer this service, and it may result in some drivers losing their vehicle completely due to the increased possibility of being upside down . Being upside down means your outstanding loan balance is more than what the car is worth. So If you are owed $4,000 on an auto loan, but the car’s worth is just $2,000, then you are upside-down in the loan. If you don’t have plans to sell the vehicle, then being upside-down is not a big issue. Just continue to make payments and pay off the loan. If on the other hand you plan to trade in your vehicle, being upside down can be a problem. It is necessary to pay off the equity you’re not able to use. How do you apply for auto refinancing with cash back The process of applying for a cash-back auto refinance is the same as what you would do for the traditional . The only difference is that you need to fill out documentation and study. After you determine how much your vehicle is currently worth — through outlets such as Kelley Blue Book — you’ll be aware of the equity on the vehicle. This will help you determine how much cash you could possibly receive. Finding a lender who offers cash-back auto refinancing will take a bit more work. Not all lenders provide this service. After looking into different lenders, compare the conditions and decide which is best for you. Take note of the amount you will receive. Following the application and loan approval you will walk away with new loan conditions and additional amount. What is the best time to consider cash-back auto refinancing an option? The decision of whether or not a cash-back refinance is a choice which could cause additional financial difficulties requires an examination of the way you spend your money. Because this choice means borrowing more money than you currently owe, you are creating more debt. If you are currently struggling to pay the monthly payment, it could increase your financial burden. The two main benefits of refinancing your cash-back loan are improved loan terms and additional cash. Improved loan terms. Similar to traditional refinancing, you will get better loan terms through this process. However, even if it’s possible to reduce the amount of your monthly payments, you will just be extending the lifetime the loan and increasing the overall cost. Cash in addition. You’ll get cash from a cash-back refinance that can be beneficial if you require cash for emergencies. However, this is a temporary option that could result in increased rates of interest. Cash-back auto refinancing is a excellent option for those who have faced a financial crisis and require cash or to modify your existing loan to suit your needs. How much can I borrow with cash-back loan? The amount that you can take out, and the amount of cash that you’ll get is contingent on a few factors. The lender. Some lenders do not provide a cash-back option due to the increased risk. Vehicle value. Value of the car determines the amount of money your lender will loan you. Your credit history. Similar to most financial conditions the credit score as well as your history serves as the main determinant to determine if your loan is approved. The better your credit score, the more favorable terms you can expect to get. Risks of refinancing cash-back prior to taking the plunge with a cash-back auto refinance, it is crucial to think about all the risks associated with it. Being upside down on a loan. It is more likely that you will be upside down or underwater with your loan. When the value of your car decreases the ratio of loan to value increases the risk of being in debt — having to pay more than the vehicle is worth. Incurring more debt. Borrowing more than you owe adds more debt to your plate. The risk of repossession. If you’re having trouble making your monthly bills, then extending your loan may have not enough of a benefit to fix more serious financial issues. This could mean that your car will be taken away if you don’t pay. Few lenders to choose from. There aren’t many lenders that provide this kind of financing so you may have only a few options to choose from when you are looking around. The bottom line is that cash-back refinancing can be a good option if you’re looking to secure better conditions on your car loan or you run into urgent cash needs. The first step when considering this type of refinance is to determine the present value of your vehicle. This will allow you to determine the amount of money an lender might be willing to provide. But be aware that there are risks involved in refinancing with cash back. You’ll incur additional debt by refinancing your auto loan for more than what’s currently due, and you could end up upside-down on the loan in addition. Learn more


The article was written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers to navigate the details of taking out loans to purchase cars. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are dedicated to helping readers gain confidence to take control of their finances by providing clear, well-researched information that breaks down otherwise complex topics into digestible chunks.

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