What to know about cash-back auto refinancing Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by offering you interactive tools and financial calculators as well as publishing original and impartial content, by enabling users to conduct research and compare information for free – so that you can make financial decisions with confidence. Bankrate has agreements with issuers, including but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make money The products that appear on this site are from companies who pay us. This compensation may impact how and when products are featured on the site, such as for instance, the order in which they be listed within the categories of listing, except where prohibited by law. This applies to our mortgage home equity, mortgage and other home lending products. This compensation, however, does have no impact on the content we publish or the reviews you read on this site. We do not include the vast array of companies or financial offers that may be open 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 ways and pitfalls of borrowing money to buy an automobile. 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 confidence to take control of their finances by providing precise, well-researched, and clear information that breaks down complex subjects into digestible pieces. The Bankrate promises

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We are compensated in exchange for placement of sponsored products and services or through you clicking certain hyperlinks on our website. So, this compensation can affect the way, location and when products appear within listing categories, unless it is prohibited by law for our mortgage home equity, mortgage and other home lending products. Other elements, such as our own rules for our website and whether a product is available in your region or within your own personal credit score can also impact the way and place products are listed on this website. While we strive to provide the most diverse selection of products, Bankrate does not include information about every credit or financial product or service. Cash-back is similar to a cash-back in the sense you can apply for better terms and conditions to replace the current loan. But, along with that you’ll also get the cash lump-sum as part of the refinance. The amount you receive depends on the equity in the vehicle. Auto owners might consider this refinance option if they are in urgent need of funds to cover an emergency, however this option comes with the potential of increasing the debt burden for the borrower. What exactly is cash-back auto refinancing? Cash-back Auto loan refinance permits you to modify to your existing loan and refinance to an amount greater than what you owe, and receive that extra amount in cash. This kind of loan is usually used by those who need extra money. The process takes what you can get from your car and converts it into cash you can walk away with. This means that while you are refinancing your current loan to new terms, you will get additional money in cash when you borrow more than the actual value of the vehicle. Some lenders do not provide this service and it could result in some drivers losing their vehicle completely due to the increased possibility of becoming . Over-indebted means that the outstanding loan balance is higher than the vehicle is worth. For instance that if you have a debt of $4,000 on a car loan, but the car’s worth is just $2,000, then you’re upside down with the loan. If you do not plan to sell the vehicle, then being upside-down isn’t a major issue. You can continue to make the payments and pay off the loan. If, on the other hand you are planning to sell your car, being upside down can be a problem. You’ll have to pay for the equity you’re not able to use. How to apply for a cash-back auto refinancing The process of applying for a cash-back auto refinance is the same as what you’d do with a traditional . The only difference is that you need to fill out documentation and study. After you determine what your car’s in value — using outlets such as Kelley Blue Book — you’ll be aware of the amount of equity that the vehicle has. This will help you determine the amount of cash you could possibly receive. Finding an lender that provides auto refinancing with cash-back will require a bit more work. Not all lenders offer this option. After researching different lenders, you can compare their conditions and decide which is the best one for you. Take note of the amount you’ll get. After the application is submitted and loan approval you will walk away with new loan conditions and additional money. What is the best time to consider cash-back auto refinancing a good idea? Deciding whether a cash-back auto refinance is an option which could cause greater financial problems requires reflection on your spending habits. Because this choice means taking out more cash than you currently owe, you’re creating more debt. If you’re struggling to make each month’s payments, this could worsen your financial situation. Two of the main advantages 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. Even if it’s possible to reduce the amount of your monthly payments however, you’ll end up extending the lifetime of the loan and increasing the total cost. Additional cash. You’ll get cash from cash-back refinances that can be useful if you require additional funds in the event of an emergency. However, this is a temporary solution that could lead to higher rates of interest. Refinancing your auto with cash back is a good idea if you faced a financial crisis and need money or need to modify your existing loan to fit better with your lifestyle. How much can I get with cash-back loan? The amount that you can borrow, and thus the amount of cash you’ll receive will depend on a number of factors. The lender. There are not all lenders that offer cash-back options due to the increased risk. Value of the vehicle. The value of your car determines the amount of money your lender will loan you. Your credit history. Similar to most financial conditions your score on credit and your history serve as the core measure for whether your loan will be approved. The better your credit score the better the terms you can expect to receive. Risks of refinancing cash-back prior to proceeding with cash-back auto refinance it is important to consider all the risks that come with it. Turning upside down on loan. You are more likely to be upside down or underwater with your loan. When the value of your car decreases, your loan-to-value ratio increases the chance of becoming under water, owing more than the vehicle’s worth. Incurring more debt. Borrowing more than you owe adds more debt to your plate. Possibility of repossession. If you’re struggling to make your monthly payments, an extension of your loan may have not enough of a benefit to fix the deeper financial challenges. This could mean that your car will be taken away if you are unable to pay. There are only a handful of lenders available. Some lenders do not offer this type of loan, so you could be stuck with very few choices to pick from when shopping around. In the end, cash-back refinancing can be a good option for those looking to secure better terms on your car loan or have an urgent need for cash. The first step to consider this kind of refinance is to determine the present value of your car. This will allow you to determine the amount an lender may be willing to offer. However, be aware of the dangers associated with the refinance of a cash-back. You’ll incur additional debt by refinancing the car loan to a higher amount than the due and you run the risk of becoming upside down on the loan as well. Learn more


This article is written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers with 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 late 2021. They are dedicated to helping readers gain the confidence to take control of their finances by providing concise, well-researched and well-researched content that breaks down complicated topics into digestible chunks.

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