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 better financial decisions by providing you with interactive tools and financial calculators that provide objective and original content. We also allow you to conduct research and compare information for free – so that you can make informed financial decisions. Bankrate has agreements with issuers such as, 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 can affect the way and when products are featured on this site, including, for example, the sequence in which they appear within the listing categories and other categories, unless prohibited by law for our mortgage, home equity and other home loan products. But this compensation does not influence the information we provide, or the reviews you see on this site. We do not cover the universe of companies or financial offerings that could 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 specializes in helping readers to navigate the ways and pitfalls of borrowing money to buy cars. Written 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 the confidence to manage their finances by providing concise, well-researched and well-documented information that breaks down complicated topics into bite-sized pieces. The Bankrate guarantee
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Therefore, this compensation may affect the way, location and when products appear in 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 offered in the area you reside in or is within your self-selected credit score range could also affect how and when products are featured on this website. Although we try to offer a wide range offers, Bankrate does not include specific information on each credit or financial products or services. Cash-back works in the sense that you use it to get new, more favorable terms to replace your current loan. But, along with that, you will also receive an amount of cash in one lump as part of refinancing. The amount you will receive is contingent on the equity in your vehicle. Auto owners might consider this refinance option if they’re in dire need of cash to cover an emergency, however this method comes with the risk of increasing the borrower’s debt. What is cash-back auto refinancing? Cash-back Auto loan refinance allows you to alter the current loan and refinance it to an amount greater than you owe, receiving the extra money in cash. This type of loan is often used by those who need more money. This process is a way to take into consideration the worth of your vehicle and turns it into cash that you can take home. This means that while you refinance your current loan for new terms you’ll receive additional funds in cash when you borrow more than the real value of the vehicle. There are not all lenders that offer this service, and it could lead to some motorists losing their vehicle altogether because of the higher chance of becoming . Over-indebted means that your outstanding loan amount is greater than what the car is worth. In other words that if you have a debt of $4,000 on the car loan however the car’s value is only $2,000 then you’re upside down on the loan. If you do not plan to sell your car, then having it upside down is not necessarily a problem. Continue to make your payments and repay the loan. If, however you are planning to trade in your vehicle, being upside down can be a challenge. You’ll need to pay off the equity you’re not able to use. How do you apply for auto refinancing with cash back The process of applying for cash-back auto refinance is the same as what you’d do with a traditional . This is a simple process that requires documentation and study. After determining how much your vehicle is in value — using websites like Kelley Blue Book — you will have an idea of the equity that the vehicle has. This figure will tell you how much cash you can potentially receive. Finding an lender that offers cash-back auto refinancing will take some time. Not all lenders offer this option. After looking into different lenders, look at their conditions and choose the one that is most suitable for your needs. Pay special attention to the amount of money you’ll receive. After the application is submitted and loan approval, you’ll be able to walk away with new loan conditions as well as the additional amount. When is cash-back auto refinancing a good idea? Deciding whether a cash-back auto refinance is the right choice that could lead to more financial troubles takes reflection on how you manage your finances. Since this option means you are borrowing more money than what you already owe you’re creating more debt. If you’re currently struggling to make each month’s payments, this could increase your financial burden. The two main benefits of cash-back refinance are improved loan terms and additional cash. Improvements in loan terms. Like traditional refinancing, you’ll receive more favorable loan terms through this process. Even if it’s possible to reduce the monthly installment but you’ll be prolonging the life of the loan and increasing your overall cost. Cash in addition. You’ll get cash from cash-back refinances that can be helpful if you need additional funds in the event of emergencies. But this is a short-term option that can lead to increased rates of interest. Cash-back auto refinancing is a good idea if you experienced a financial emergency and require money or to adjust your existing loan to better fit your needs. How much can I borrow with cash-back loan? The amount that you can take out, and the amount of cash you’ll receive is contingent on a variety of variables. The lender. Not all lenders offer 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. Credit history. Like most financial situations your credit score and past history serve as the core measure for whether your loan is approved. The better your credit is the better the terms you can expect to get. Risks of refinancing cash-back prior to taking the plunge with a cash-back auto refinance, it is essential to take into consideration 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 on your loan. As the car’s value depreciates your loan-to-value ratio rises. the likelihood of being underwater — owing more than the vehicle’s worth. Incurring more debt. The debt you take on more than you are owed adds more debt to your plate. Possibility of repossession. If you are having trouble making your monthly payments, an extension of your loan could not be enough to fix the deeper financial challenges. It could be that your car is taken if you are unable to pay. There are only a handful of lenders available. Not all lenders provide this kind of financing so you may have a limited number of options to choose from when looking for. In the end, cash-back refinancing is a great alternative if you’re trying to secure better terms on your auto loan or if you have an urgent need for cash. The first step in considering this type of refinance to research the current value of your vehicle. This will allow you to determine the amount of money a lender could be willing to provide. But be aware that there are risks involved in a cash-back refinance. You incur more debt by refinancing the auto loan for more than what’s currently due, and you could end up upside-down on the loan as well. Learn more
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This article is written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers to navigate the ins and outs of securely taking out loans to purchase a car. Written 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 manage their finances through providing concise, well-researched and well-researched content that breaks down otherwise complex topics into manageable bites.
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