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What to know about cash-back auto refinancing Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make smarter financial decisions by providing you with interactive tools and financial calculators that provide objective and original content, by enabling users to conduct research and compare data at no cost to help you make informed financial decisions. Bankrate has partnerships with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this site come from companies that compensate us. This compensation can affect the way and when products are featured on the site, such as for instance, the order in which they be listed within the categories of listing in the event that they are not permitted by law. Our mortgage home equity, mortgage and other home lending products. But this compensation does have no impact on the information we publish, or the reviews you read on this site. We do not cover the vast array of companies or financial deals that might be accessible to you. Georgijevic/Getty Images

4 minutes read. Published August 22 2022

Authored by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers to navigate the details of borrowing money to buy a car. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to take control of their finances by providing clear, well-researched information that breaks down complex subjects into digestible pieces. The Bankrate promise

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They ensure that what we write will ensure that our content is reliable, honest and trustworthy. The loans reporter and editor focus on the points consumers care about most — the various kinds of loans available and the most competitive rates, the top lenders, how to repay debt, and many more — so you’re able to be confident about investing your money. Editorial integrity

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If you have questions about money. Bankrate has the answers. Our experts have been helping you manage your money for over four decades. We continually strive to give our customers the right guidance and tools required to succeed throughout life’s financial journey. Bankrate adheres to a strict code of conduct standard of conduct, so you can rest assured that our content is honest and precise. Our award-winning editors, reporters and editors create honest and accurate content to help you make the right financial decisions. The content created by our editorial team is factual, objective and uninfluenced through our sponsors. We’re transparent about the ways we’re in a position to provide quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the placement of sponsored products and services, or when you click on specific links on our site. This compensation could impact how, where and when products appear in listing categories, unless prohibited by law for our mortgage home equity, mortgage and other products for home loans. Other factors, like our own proprietary website rules 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 each credit or financial product or service. Cash-back is like in the sense that you apply to receive new, more favorable terms to take over your current loan. In addition you’ll also get an amount of cash in one lump in the refinance. The amount you receive depends on the equity that is present in your car. Auto owners might consider this refinance option if they’re in need of money to cover an emergency, however this method comes with the potential of increasing the amount of debt the borrower has to pay. What exactly is cash-back auto refinancing? A cash-back auto loan refinance lets you adjust your current loan and refinance it to the amount higher than what you owe, and receive the extra money in cash. This kind of loan is often 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 are able to take away. This means that if you refinance your existing loan to new terms, you’ll receive additional funds in cash when you borrow more than the true worth of the vehicle. Not all lenders offer this service, and it may lead to some motorists losing their vehicle altogether because of the higher chance of becoming upside down . In the case of being upside-down, your outstanding loan amount is greater than the value of the vehicle. So, if you owe $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 have no plans to sell the vehicle, then being upside-down isn’t a major issue. Continue to make your payments and 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. It is necessary to pay off the negative equity yourself. How to apply for cash-back auto refinancing The procedure to apply for 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 paperwork and study. Once you have determined how much your vehicle is today worth through sources like Kelley Blue Book — you’ll have an idea of the amount of equity that the vehicle has. This number will inform how much cash you can possibly receive. Finding a lender who offers cash-back auto refinancing is a bit more work. There are not all lenders that offer this option. After researching various lenders, you can compare their terms and determine which option is best for you. Be sure to pay attention to the amount you’ll get. Following the application and loan approval, you’ll walk away with new loan terms and the extra amount. Is cash-back auto refinancing a good idea? Determining whether cash-back auto refinance is an option which could cause more financial troubles takes an examination of the way you spend your money. Because this means borrowing more than you already owe, you are creating more debt. If you’re struggling to pay your monthly payments, this may increase your financial burden. Two of the main advantages of refinancing cash-back are better loan terms and additional cash. Improvements in loan terms. Just as with traditional refinancing, it is possible to be offered better loan conditions through this method. However, even if it’s possible to reduce the monthly installment however, you’ll end up extending the lifetime the loan and increasing the overall cost. Cash in addition. You’ll get cash from a cash-back refinance which is particularly beneficial if you require cash for an emergency. However, this is a temporary solution that could lead to more expensive interest rates. Cash-back auto refinancing is good idea if you had a financial emergency and need money or need to adjust your current loan to fit better with your lifestyle. How much can I borrow via cash-back loan? The amount that you can borrow, and thus the amount of money you’ll receive will depend on a few factors. The lender. Some lenders do not offer a cash-back option due to the higher risk. Vehicle value. The value of your car determines the amount your lender will offer you. Credit history. Like most financial situations, your score on credit and your history are the primary determinant for whether your loan is approved. The better your credit score the better the terms you can expect to receive. Cash-back refinancing risk Before taking the plunge with a cash-back auto refinance, it is crucial to think about all the risks that come with it. Turning upside down on loan. It is more likely that you will become upside down or underwater in your loan. When the value of your car decreases the ratio of loan to value increases the chance of becoming in debt — having to pay more than the vehicle’s worth. Incurring more debt. In fact, borrowing more than you owe will add more debt on your plate. Risk of repossession. If you are having trouble making your monthly bills, then an extension of your loan might not be enough 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 offer this type of financing so you may be stuck with very few options to choose from when looking for. The bottom line Cash-back refinancing can be a good alternative if you’re trying to score more favorable conditions on your car loan or if you have an urgent need for cash. The first step when considering this type of refinance is to research the current value of your vehicle. This will allow you to determine how much money an lender could be willing to give you. However, be aware of the risks involved in a cash-back refinance. You’ll incur additional debt by refinancing the auto 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

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The article was 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 buy a car. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are passionate about helping readers gain the confidence to take control of their finances with precise, well-studied information that breaks down complicated topics into manageable bites.

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