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 financial calculators and tools, publishing original and objective content, by enabling you to conduct your own research and compare information for free and help you make financial decisions with confidence. Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that appear on this site come from companies that compensate us. This compensation could affect how and when products are featured on this site, including, for example, the order in which they appear within the listing categories in the event that they are not permitted by law. Our mortgage, home equity and other home loan products. This compensation, however, does not influence the information we publish, or the reviews that you see on this site. We do not contain the entire universe of businesses or financial offers that may be open to you. Georgijevic/Getty Images
4 min read . Published August 22, 2022
Written by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in helping readers to navigate the ins and outs of securely borrowing money to buy an automobile. 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 through providing clear, well-researched facts that break down complex subjects into digestible pieces. The Bankrate promises
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We are compensated in exchange for the promotion of sponsored goods and, services, or when you click on certain hyperlinks on our website. Therefore, this compensation may influence the manner, place and in what order products appear within listing categories, except where it is prohibited by law for our mortgage or home equity products, as well as other products for home loans. Other elements, such as our own website rules and whether or not a product is available in your region or within your own personal credit score could also affect the way and place products are listed on this site. Although we try to offer a wide range offers, Bankrate does not include details about every financial or credit product or service. Cash-back is like in that you use it to get newterms that are more favorable in exchange for the current loan. But, along with that you'll also receive an amount of cash in one lump as part of refinancing. The amount you will receive is contingent on the equity present on your car. Owners of cars may be interested in this type of refinance if they're in need of cash for an emergencysituation, but this method comes with the potential of increasing the amount of debt the borrower has to pay. What is cash-back auto refinancing? A cash-back auto loan refinance allows you to alter to your existing loan and refinance to the amount higher than what you owe, and receive the additional amount in cash. This kind of loan is typically used by those who need more money. It takes the value of your car and turns it into cash you can walk away with. This means that while you refinance your existing loan for new terms you can get more money in the form of cash, by borrowing more than the actual value of the vehicle. Some lenders do not provide this service, and it could result in some drivers losing their car completely due to the increased possibility of becoming . In the case of being upside-down, the outstanding loan amount is greater than what the car is worth. So that if you have a debt of $4,000 on the car loan and the vehicle's value is only $2,000 then you are upside-down in the loan. If you don't have plans to sell the car, then having it upside down is not a big issue. Just continue to make payments and repay the loan. If on the other hand, you hope to sell your vehicle but are in a position of being upside down, that could be a challenge. You'll have to pay for the negative equity yourself. How do you apply for cash-back auto refinancing The procedure to apply for cash-back auto refinances is similar to what you'd do with the traditional . It simply requires documentation and study. After determining the value of your car today worth via websites like Kelley Blue Book -- you'll be aware of the equity on the vehicle. This number will inform how much cash you can get. Finding an lender who offers auto refinancing with cash-back will require a bit more work. Not all lenders offer this option. After looking into different lenders, look at their conditions and decide which is best for you. Pay special attention to the amount of money you will receive. Following the application and loan approval you will walk away with new loan conditions and additional cash. What is the best time to consider cash-back auto refinancing a good idea? Deciding whether a cash-back auto refinance is the right choice that could result in greater financial problems requires an examination of the way you spend your money. Since this option means you are borrowing more money than you already owe, you're creating additional debt. If you're currently struggling to make the monthly payment, it may make your financial situation worse. The two primary benefits of refinancing cash-back are better loan conditions and cash. Better loan terms. Like traditional refinancing, it is possible to get better loan terms with this method. But even if it is possible to reduce your monthly payment, you will just be increasing the duration of the loan and increasing your overall cost. Additional cash. You will receive money from the refinance with cash-back that can be helpful if you need additional cash in case of an emergency. But this is a short-term option that could result in increased interest rates. Refinancing your auto with cash back is a good idea if you had a financial emergency and need money or need to adjust your current loan to better fit your needs. How much can I borrow via a cash-back loan? The amount you can take out, and the amount of cash you will receive, is dependent on a number of factors. The lender. There are not all lenders that offer a cash-back option due to the increased risk. Value of the vehicle. Value of the car determines the amount of money your lender will give you. The credit score of your history. Similar to most financial conditions your credit score and past history are the primary determinant for whether your loan is approved. The better your credit score, the more favorable terms you can expect to get. Cash-back refinancing risks Before taking the plunge with a cash-back auto refinance, it is crucial to think about all the risks that come with it. Going upside down on loan. It is more likely that you will end up underwater or upside down in your loan. If the value of the vehicle decreases the ratio of loan to value increases the risk of being under water, owing more than the vehicle's worth. Incurring more debt. In fact, borrowing more than you owe adds more debt to your plate. The risk of repossession. If you're struggling to keep up with your monthly payments, extending your loan might have not enough of a benefit to fix more serious financial issues. This could mean your vehicle is taken if you don't pay. Few lenders to choose from. Not all lenders provide this kind of loan, so you could have a limited number of alternatives to consider when looking for. The bottom line Cash-back refinancing could be a viable option if you're looking to score more favorable conditions on your car loan or have an urgent need for cash. The first step to consider this kind of refinance is to study the current value of your vehicle. This will allow you to determine how much money a lender could be willing to provide. However, be aware of the dangers associated with the refinance of a cash-back. There is a higher risk of debt when refinancing the car loan for more than what's currently due, and you risk becoming upside-down on the loan as well. Learn more
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Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ins and outs of securely borrowing money to purchase a car. Written 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 the confidence to take control of their finances through providing concise, well-researched and well-researched content that breaks down otherwise complex topics into manageable bites.
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