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 better financial choices by providing you with interactive tools and financial calculators that provide objective and original content. This allows you to conduct your own research and compare data for free and help you make informed financial decisions. Bankrate has partnerships with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The deals that are displayed on this website are provided by companies who pay us. This compensation can affect the way and when products are featured on the site, such as, for example, the order in which they appear in the listing categories in the event that they are not permitted by law. This applies to our mortgage, home equity and other home loan products. But this compensation does have no impact on the content we publish or the reviews you read on this site. We do not contain the entire universe of businesses or financial offers that may be accessible to you. Georgijevic/Getty Images
4 min read Published August 22, 2022
Authored by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers with the ways and pitfalls of taking out loans to buy a car. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are committed to helping readers gain confidence to manage their finances through providing concise, well-researched and well-documented facts that break down complex topics into manageable bites. The Bankrate promises
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We are compensated in exchange for the promotion of sponsored goods and, services, or by you clicking on certain hyperlinks on our site. This compensation could impact how, where and in what order the products are listed within categories, unless it is prohibited by law for our mortgage home equity, mortgage and other products for home loans. Other elements, such as our own proprietary website rules and whether a product is offered in your area or at your own personal credit score could also affect the way and place products are listed on this site. Although we try to offer an array of offers, Bankrate does not include specific information on each credit or financial products or services. Cash-back is like in the sense you can apply for new, more favorable terms to take over the current loan. However, in addition to that you’ll also get an amount of cash in one lump as part of refinancing. The amount you get is contingent on the equity present on your car. Car owners may consider this kind of refinance when they’re in dire need of cash for an emergencysituation, but this option comes with the potential of increasing the amount of debt the borrower has to pay. What is a cash-back refinancing? A cash-back auto loan refinance allows you to alter to your existing loan and refinance to an amount greater than you owe, receiving the extra money in cash. This kind of loan is usually utilized by people who require additional funds. This process is a way to take what you can get from your vehicle and converts it into cash you can walk away with. This means that if you refinance your existing loan for new terms you will get additional money in the form of cash when you borrow more than the true worth of the car. Some lenders do not offer this service, and it may result in some drivers losing their vehicle altogether because of the higher chance of becoming . Being upside down means your outstanding loan balance is higher than what the car is worth. In other words If you are owed $4,000 on an auto loan however the car’s value is only $2,000 you’re upside-down in the loan. If you do not plan to sell your vehicle, then being upside-down is not necessarily a problem. You can continue to make the payments and pay off the loan. If on the other hand you plan to sell your car but are in a position of being upside down, that could be a challenge. You’ll have to pay for the equity that is negative. How do you apply for cash-back auto refinancing The procedure for applying for cash-back auto refinances is similar to what you’d do with a traditional . This is a simple process that requires documentation and study. After you determine what your car’s today worth through outlets such as Kelley Blue Book — you will have an idea of the amount of equity on the vehicle. This will help you determine how much cash you could get. Finding a lender that offers cash-back auto refinancing will take some effort. Some lenders do not offer this service. After researching different lenders, compare the conditions and decide which is the best one for you. Pay special attention to the amount of money you will receive. After the application and loan approval, you’ll walk away with new loan terms and the extra money. 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 that could result in more financial troubles takes review of your spending habits. Because this choice means taking out more cash than what you already owe you’re creating more debt. If you are currently struggling to make your monthly payments, this could make your financial situation worse. The two main benefits of cash-back refinance are improved loan terms and additional cash. Improved loan terms. Like traditional refinancing, you will be offered better loan terms through this process. However, even if it’s possible to lower the monthly installment however, you’ll end up prolonging the life the loan and increasing the total cost. Cash in addition. You’ll receive cash through cash-back refinances which is particularly helpful if you need additional cash for emergencies. However, this is a temporary solution that could lead to more expensive rates of interest. Cash-back auto refinancing is a good idea if you had a financial emergency and need money or need to modify your existing loan to better fit your needs. What is the maximum amount I can borrow with cash-back loan? The amount you can get, and consequently the amount of money you will receive will depend on a variety of variables. The lender. Not all lenders provide a cash-back option due to the higher risk. Value of the vehicle. The value of your vehicle determines how much your lender will loan you. Your credit history. Like most financial situations, the credit score as well as past history serves as the main determinant to determine if your loan will be approved. The better your credit is and the better conditions you’ll get. Cash-back refinancing risk Before making a decision to refinance your cash-back auto loan, it is crucial to think about the various risks that go along with it. Turning upside down on loan. It is more likely that you will end up underwater or upside down on your loan. When the value of your car decreases your loan-to-value ratio rises. the likelihood of being underwater — owing more than the vehicle’s worth. Incurring more debt. Borrowing more than you owe stacks even more debt on your plate. The risk of repossession. If you are having trouble making your monthly bills, then the extension of your loan may just not suffice to solve deeper financial problems. It could be that your car is taken if you are unable to pay. Few lenders to choose from. Not all lenders offer this type of financing , and you’ll have only a few choices to pick from when shopping around. The bottom line is that cash-back refinancing could be a viable option for those looking to get better terms on your car loan or have urgent cash needs. The first step when considering this kind of refinance is to determine the present value of your car. This will let you know the amount a lender may be willing to give you. However, be aware of the risks involved in a cash-back refinance. There is a higher risk of debt when refinancing your auto loan in excess of what is currently owed and you also could end up upside-down on the loan in addition. Find out more
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Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers to navigate the ways and pitfalls of borrowing money to purchase a car. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers gain confidence to manage their finances through providing concise, well-researched and well-researched content that breaks down otherwise complex subjects into bite-sized pieces.
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