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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 choices by providing you with interactive financial calculators and tools that provide objective and original content. We also allow you to conduct research and compare data 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 offers that appear on this website are provided by companies that compensate us. This compensation can affect the way and where products appear on the site, such as such things as the sequence in which they appear in the listing categories, except where prohibited by law. This applies to our mortgage, home equity and other products for home loans. But this compensation does affect the information we provide, or the reviews that you see on this site. We do not include the vast array of companies or financial offers that may be available to you. Georgijevic/Getty Images

4 minutes read. Published August 22, 2022

Writer: Rebecca Betterton 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 buy cars. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain confidence to manage their finances by providing concise, well-researched and well-documented information that breaks down complex subjects into digestible pieces. The Bankrate guarantee

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This compensation could influence the manner, place and when the products are listed within categories, unless it is prohibited by law for our mortgage or home equity products, as well as other home lending products. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your own personal credit score can also impact how and where products appear on this website. We strive to offer a wide range offers, Bankrate does not include details about every financial or credit product or service. Cash-back works in that you use it to get better terms and conditions in exchange for the current loan. But, along with that, you will also receive a lump sum of cash as part of the refinance. The amount you get is contingent on the equity in the vehicle. Owners of cars may be interested in this type of refinance if they are in urgent need of cash for an emergencysituation, but this method comes with the potential of increasing the borrower’s debt. What is cash-back auto refinancing? Cash-back Auto loan refinance allows you to alter your current loan and refinance it to the amount higher than you owe, receiving the additional amount in cash. This type of loan is usually employed by people who require additional funds. It takes what you can get from your vehicle and converts it into cash you are able to take away. This means that while you are refinancing your current loan for a new term, you can get more money in the form of cash by borrowing more than the actual value of the vehicle. There are not all lenders that offer this service, and it could result in some drivers losing their car completely due to the increased possibility of becoming . Being upside down means your outstanding loan amount is greater than what the car is worth. For instance that if you have a debt of $4,000 on a car loan and the vehicle’s value is only $2,000, you’re upside-down on the loan. If you do not plan to sell the car, then having it upside down isn’t a major issue. Continue to make your payments and then pay off the loan. If, on the other hand, you hope to trade in your vehicle but are in a position of being upside down, that could be a hassle. You’ll need to pay off the equity you’re not able to use. 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 . This is a simple process that requires documents and study. After determining how much your vehicle is in value — using outlets such as Kelley Blue Book — you’ll have an idea of the amount of equity in the vehicle. This number will inform how much cash you can potentially receive. Finding an lender that offers cash-back auto refinancing is a bit more work. Not all lenders provide this service. After researching different lenders, look at their conditions and decide which is most suitable for your needs. Be sure to pay attention to the amount of money you’ll get. After the application and loan approval you will leave with new loan terms and the extra amount. Is cash-back auto refinancing an option? The decision of whether or not a cash-back refinance is an option which could cause additional financial difficulties requires reflection on how you manage your finances. Since this option means you are taking out more cash than you already owe, you are creating more debt. If you are currently having difficulty making your monthly payments, this could increase your financial burden. The two main benefits of cash-back refinance are improved loan conditions and cash. Improvements in loan terms. Like traditional refinancing, it is possible to be offered better loan terms through this process. But even if it is possible to reduce your monthly payment but you’ll be extending the lifetime of your loan and increasing the overall cost. Cash in addition. You’ll receive cash through a cash-back refinance, which can be especially beneficial if you require funds in the event of an emergency. It’s a temporary option that could result in more expensive interest rates. Cash-back auto refinancing is a excellent option for those who have had a financial emergency and need money or need to alter your current loan to fit better with your needs. How much can I get through a cash-back loan? The amount that you can get, and consequently the amount of cash that you will receive is contingent on a variety of variables. The lender. Not all lenders offer cash-back options due to the increased risk. Value of the vehicle. The value of your vehicle determines the amount of money your lender will loan you. The credit score of your history. As with most financial circumstances your score on credit and past history serves as the main determinant for determining whether your loan will be approved. The better your credit score and the better terms you will receive. Risks of refinancing cash-back prior to proceeding with cash-back auto refinance it is essential to take into consideration all the risks associated with it. Turning upside down on loan. It is more likely that you will be upside down or underwater with your loan. When the value of your car decreases your loan-to-value ratio rises. 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 will add more debt on your plate. Risk of repossession. If you are having trouble making the monthly payment, an extension of your loan could not be enough to fix the deeper financial challenges. It could be that your car is taken away if you fail to pay. There are a few lenders to choose from. There aren’t many lenders that provide this kind of financing so you may have only a few options to choose from when you are looking around. The bottom line is that cash-back refinancing could be a viable option if you’re looking to secure better conditions on your car loan or if you have urgent cash needs. The first step when considering this kind of refinance is to research the current value of your car. This will help determine the amount of money a lender may be willing to offer. However, be aware of the dangers associated with refinancing with cash back. You’ll incur additional debt by refinancing the auto loan in excess of what is currently owed and you also risk becoming upside-down on the loan as well. Find out more

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Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers to navigate the details of taking out loans to purchase an automobile. 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 manage their finances by providing concise, well-researched and well-researched content that break down complex subjects into bite-sized pieces.

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