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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 goal is to help you make better financial decisions by providing you with interactive financial calculators and tools that provide objective and original content. We also allow you to conduct your own research and compare data for free and help you make financial decisions with confidence. Bankrate has partnerships with issuers including, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are displayed on this website are provided by companies that compensate us. This compensation can affect the way and when products are featured on this website, for example such things as the order in which they be listed within the categories of listing in the event that they are not permitted by law for our mortgage or home equity products, as well as other home lending products. But this compensation does affect the information we publish, or the reviews that appear on this website. We do not include the vast array of companies or financial deals that might be available 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 in navigating the details of borrowing money to buy a car. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are committed to helping readers gain the confidence to take control of their finances with clear, well-researched information that breaks down otherwise complex subjects into digestible pieces. The Bankrate promises
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We receive compensation for the placement of sponsored products and, services, or by you clicking on specific links on our website. Therefore, this compensation may influence the manner, place and in what order products appear in listing categories, except where prohibited by law for our mortgage home equity, mortgage and other products for home loans. Other elements, such as our own website rules and whether a product is available within the area you reside in or is within your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide an array of offers, Bankrate does not include details about every financial or credit item or product. Cash-back is like in the sense that you apply to receive new, more favorable terms to take over your current loan. However, in addition to that you'll also get an amount of cash in one lump as part of the refinance. The amount you will receive is contingent on the equity that is present in your vehicle. Owners of cars may be interested in this kind of refinance when they are in urgent need of money for an emergencysituation, but this method comes with the risk of increasing the debt burden for the borrower. What is a cash-back refinancing? A cash-back auto loan refinance permits you to adjust your current loan and refinance to the amount higher than you owe, receiving the extra money in cash. This kind of loan is usually employed by people who require extra money. It takes the value of your car and converts it into cash you can take home. This means that if you are refinancing your current loan for new terms you can get more money in the form of cash, by borrowing more than the real value of the vehicle. Some lenders do not offer this service, and it can result in some drivers losing their car completely because of the higher chance of becoming . Over-indebted means that the outstanding loan amount is greater than what the car is worth. In other words that if you have a debt of $4,000 on a car loan, but the car's value is only $2,000, you're upside-down on the loan. If you have no plans to sell the car, being upside down is not a big issue. Just continue to make payments and then pay off the loan. If, however you plan to trade in your vehicle, being upside down can be a problem. You'll need to pay off the equity you're not able to use. How do you apply for a cash-back auto refinancing The process of applying for cash-back auto refinances is similar to the process you'd apply for the traditional . This is a simple process that requires documentation and study. After determining the value of your car today worth via outlets such as Kelley Blue Book -- you'll be aware of the equity in the vehicle. This number will inform how much cash you can get. Finding an lender who offers auto refinancing with cash-back will require some effort. Some lenders do not provide this service. After researching different lenders, compare the conditions and choose the one that is best for you. Pay special attention to the amount you'll get. Following the application and loan approval, you'll be able to walk away with new loan conditions as well as the additional cash. Is cash-back auto refinancing an option? Determining whether cash-back auto refinance is a choice which could cause greater financial problems requires review of how you manage your finances. Because this choice means borrowing more than you already owe, you are creating more debt. If you're currently having difficulty making your monthly payments, this could increase your financial burden. Two of the main advantages of refinancing cash-back are better loan conditions and cash. Improved loan terms. Similar to traditional refinancing, you will get better loan terms through this process. However, even if it's possible to reduce the amount of your monthly payments however, you'll end up extending the lifetime of your loan and increasing the overall cost. Additional cash. You'll get cash from the refinance with cash-back that can be useful if you require additional cash for an emergency. It's a temporary 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 require cash or to adjust your current loan to better fit your needs. How much can I get with cash-back loan? The amount you can get, and consequently the amount of cash you'll receive, is dependent on a number of factors. The lender. There are not all lenders that offer a cash-back option because of the risk. Vehicle value. Your value for your vehicle determines how much your lender will give you. Credit history. Like most financial situations your credit score and past history serves as the main determinant for determining whether your loan is approved. The better your credit score and the better conditions you'll be granted. Cash-back refinancing risks Before making a decision to refinance your cash-back auto loan, it is essential to take into consideration the various risks that go along with it. Going upside down on loan. You are more likely to end up underwater or upside down with your loan. If the value of the vehicle decreases, your loan-to-value ratio increases the likelihood of being under water, owing more than the vehicle's worth. Incurring more debt. The debt you take on more than you are owed stacks even more debt on your plate. Possibility of repossession. If you are struggling to make your monthly payments, extending your loan may have not enough of a benefit to fix more serious financial issues. This could mean that your car will be taken away if you fail to pay. There are a few lenders to choose from. There aren't many lenders that offer this type of financing so you may have only a few alternatives to consider when shopping around. In the end, cash-back refinancing can be a good alternative if you're trying to score more favorable terms on your car loan or you run into an urgent need for cash. The first step to consider this type of refinance to study the current value of your car. This will allow you to determine how much money a lender may be willing to provide. However, be aware of the risk involved with refinancing with cash back. There is a higher risk of debt when refinancing your auto loan for more than what's currently owed and you also could end up upside-down on the loan in addition. 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 to navigate the ways and pitfalls of borrowing money to buy a car. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are dedicated to helping readers gain the confidence to take control of their finances with concise, well-researched and well-researched content that breaks down otherwise complex subjects into bite-sized pieces.
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