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4 min read . Published August 22 2022

Writer: Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers with the ways and pitfalls of borrowing money to purchase a car. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are committed to helping readers gain the confidence to manage their finances by providing precise, well-researched, and clear information that breaks down otherwise complicated topics into bite-sized pieces. The Bankrate promise

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We receive compensation for the promotion of sponsored goods and services, or when you click on specific links on our website. So, this compensation can impact how, where and when products appear within listing categories, unless it is prohibited by law for our mortgage or home equity products, as well as other products for home loans. Other factors, like our own proprietary website rules and whether the product is offered in your area or at your personal credit score could also affect the way and place products are listed on this website. Although we try to offer the most diverse selection of products, Bankrate does not include specific information on every credit or financial item or product. Cash-back works in the sense that you apply to receive new, more favorable terms to take over your current loan. However, in addition to that you’ll also get an amount of cash in one lump in the refinance. The amount you will receive is contingent on the equity that is present in your car. Owners of cars may be interested in this kind of refinance when they’re in dire need of money for an emergencysituation, but this choice does come with the potential of increasing the borrower’s debt. What is cash-back auto refinancing? A cash-back auto loan refinance allows you to modify the current loan and refinance to an amount greater than you oweand then receive the additional amount in cash. This kind of loan is usually utilized by people who require more money. It takes what you can get from your car and converts it into cash you can walk away with. This means that if you refinance your current loan to new terms, you will get additional money in the form of cash by borrowing more than the real value of the vehicle. There are not all lenders that provide this service and it could lead to some motorists losing their vehicle altogether due to the increased possibility of becoming upside down . In the case of being upside-down, the outstanding loan amount is greater than what the car is worth. In other words that if you have a debt of $4,000 on a car loan and the vehicle’s value is only $2,000 you’re upside-down on the loan. If you have no plans to sell your car, being upside down is not a big issue. Continue to make your payments and then pay off the loan. If on the other hand you are planning to sell your car and are upside down, it could be a problem. You’ll need to pay off the negative equity yourself. How to apply for a cash-back auto refinancing The process of applying for cash-back auto refinances is the same as what you’d do with a traditional . The only difference is that you need to fill out documentation and study. Once you have determined how much your vehicle is today worth through websites like Kelley Blue Book — you’ll have an idea of the amount of equity that the vehicle has. This will help you determine the amount of cash you could possibly receive. Finding a lender that provides cash-back auto refinancing is a bit more work. Not all lenders provide this service. After researching various lenders, you can compare their conditions and choose the one that is best for you. Be sure to pay attention to the amount of money you will receive. After the application is submitted and loan approval, you’ll walk away with new loan conditions as well as the additional amount. Is cash-back auto refinancing an option? Determining whether cash-back auto refinance is the right choice which could cause more financial troubles takes reflection on your spending habits. Because this choice means taking out more cash than you currently owe, you are creating more debt. If you are currently struggling to pay the monthly payment, it may increase your financial burden. The two main benefits of refinancing your cash-back loan are improved loan terms and additional cash. Improved loan terms. Just as with traditional refinancing, it is possible to receive more favorable loan conditions through this method. Even if it’s possible to lower the monthly installment but you’ll be increasing the duration the loan and increasing your overall cost. Cash in addition. You’ll receive cash through a cash-back refinance which is particularly beneficial if you require funds in the event of an emergency. However, this is a temporary option that can lead to more expensive interest rates. Cash-back auto refinancing is good idea if you experienced a financial emergency and need money or need to alter your existing loan to better fit your lifestyle. How much can I get through a cash-back loan? The amount that you can get, and consequently the amount of money you will receive will depend on a variety of variables. The lender. Some lenders do not provide a cash-back option because of the risk. Vehicle value. The value of your vehicle determines how much your lender will offer you. Credit history. As with most financial circumstances your credit score and history serves as the main determinant for determining whether your loan is approved. The better your credit is, the more favorable terms you will receive. Cash-back refinancing risks Before making a decision to refinance your cash-back auto loan, it is essential to take into consideration all the risks associated with it. Going upside down on loan. You are more likely to become upside down or underwater in 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. In fact, borrowing more than you owe will add more debt on your plate. Risk of repossession. If you’re having trouble making the monthly payment, an extension of your loan could just not suffice to address more serious financial issues. This could mean your vehicle is taken if you fail to pay. There are a few lenders to choose from. Some lenders do not provide this kind of financing , and you’ll have only a few alternatives to consider when looking for. In the end, cash-back refinancing is a great option if you’re looking to get better conditions on your car loan or have an urgent need for cash. The first step when considering this type of refinance to study the current value of your car. This will let you know the amount a lender could be willing to offer. But be aware that there are dangers associated with a cash-back refinance. You incur more debt by refinancing the car loan to a higher amount than the currently owed and you also could end up upside-down on the loan and vice versa. Learn more


Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers with the details of borrowing money to buy cars. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are passionate about helping readers gain the confidence to manage their finances by providing clear, well-researched information that break down complex subjects into bite-sized pieces.

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