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Common car refinancing mistakes to avoid Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial choices by offering interactive tools and financial calculators as well as publishing reliable and original content. We also allow you to conduct your own research and compare information for free and help you make financial decisions with confidence. Bankrate has agreements 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 advertised on this site come from companies who pay us. This compensation could affect how and where products appear on the site, such as, for example, the order in which they appear in the listing categories, except where prohibited by law. This applies to our loan products, such as mortgages and home equity and other home loan products. However, this compensation will have no impact on the information we publish, or the reviews you read on this site. We do not contain the vast array of companies or financial offerings that could be accessible to you. Tom Werner/Getty Images

3 minutes read. Published 24 February 2023

Writer: Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the details of taking out loans to purchase cars. 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 the confidence to control their finances by providing clear, well-researched facts that break down complicated subjects into digestible pieces. The Bankrate promises

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At Bankrate we are committed to helping you make better financial choices. While we adhere to strict ethical standards ,

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In 1976, Bankrate was founded. Bankrate has a long history of helping people make wise financial decisions.

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We make sure that everything we publish will ensure that our content is reliable, honest and reliable. Our loans reporters and editors are focused on the areas that consumers are concerned about most — the different types of lending options as well as the best rates, the most reliable lenders, the best ways to repay debt, and more — so you’re able to be confident about making your decision to invest your money. Editorial integrity

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There are money-related questions. Bankrate can help. Our experts have helped you understand your money for over four decades. We strive to continuously give consumers the professional advice and tools needed to be successful throughout their financial journey. Bankrate adheres to strict standards standard of conduct, which means that you can be sure that our content is truthful and accurate. Our award-winning editors, reporters and editors provide honest and trustworthy content to help you make the best financial decisions. Our content produced by our editorial staff is factual, objective and is not influenced from our advertising. We’re honest about how we are in a position to provide quality content, competitive rates, and helpful tools to you , by describing 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 andservices or when you click on specific links on our website. This compensation could impact how, where and in what order products are listed in the event that they are not permitted by law. We also offer mortgage, home equity and other home loan products. Other elements, such as our own proprietary website rules and whether or not a product is available in the area you reside in or is within your own personal credit score could also affect how and where products appear on this site. Although we try to offer an array of offers, Bankrate does not include information about each credit or financial item or product. If you are having trouble making your current loan payments, changing your auto loan with a new one — can be an excellent way to save money and remain behind the wheel of your vehicle. But there are some common mistakes to avoid in order to ensure you don’t end up in yet another precarious financial spot. The top seven mistakes in refinancing your car Avoid these common traps when refinancing your car loan. 1. Don’t check the refinancing requirements. Lenders have specific requirements when it comes to refinancing. Keep an eye out for the criteria pertaining to your vehicle’s mileage, age and the amount you have left to repay the loan. For instance, lenders typically require a minimum of six months’ worth of payments to the loan and a remaining balance between $3,000 to $5,000 to refinance. Bankrate tip

You can find refinancing guidelines on the banks’ websites as well as Bankrate’s .

2. Not checking with your current lender first . While your current lender might not have the lowest interest rates, it is still the best place to begin. Before exploring refinancing options outside your current lender, it is wise to approach them and tell them about your situation to determine if they are able to assist. Some lenders offer this, which alters the terms, the due date for payments or interest rate to help borrowers get financial relief. Tips from Bankrate

Even if you still follow through with refinancing the loan, it is possible that they can offer you more than a new lender could.

3. Intending your loan time too much. Refinancing aims to cut costs, but should you extend the term of your loan to a large extent and you are spending more money over its lifetime. While a will mean the payment will be lower but you’ll also be paying more interest. Tips from Bankrate

Before adjusting your term make use of auto refinances to ensure you save money.

4. Don’t take into account your credit score Like most situations with loans, the credit score score serves as the primary factor in approval. So, work to improve prior to you refinance your loan. You’ll have a better chance to receive the available and walk away with an improved loan overall. Credit scores of 670 and higher generally qualifies borrowers to the highest interest rates. Bankrate tip

Check your credit ahead of loan applications by using AnnualCreditReport.com.

5. Just shopping with one lender As you would when you are shopping for your first auto loan, we recommend comparing at least three different lenders. While deciding on the initial loan offer may be tempting, not all lenders are made equally. Ultimately, the lower the interest rate, the lower the cost of your car. You want to ensure you’re getting the best offer available. Tips for Bankrate

Compare the rates currently provided by a variety of lenders. Be aware of the conditions for approval, the repayment options and how it stacks up against what you currently have on your loan.

6. Being upside down on your loan Prior to refinancing, you should determine what equity in your car is by comparing it to a . Equity is the sum by which the vehicle’s value exceeds the amount you have to pay on the auto loan. If you have debt that is greater than the value of your vehicle or you have equity that is negative refinancing is not a good idea. The bankrate advice

Don’t refinance a vehicle you can’t afford. Find out where you may be overextending and calculate expected costs before signing off on an additional loan.

7. Don’t give up after the initial rejection loan refinancing guidelines differ from lender to lender So just because you were rejected by one lender doesn’t necessarily mean that you’ll be rejected at all. If you’re thinking, “Why can’t I refinance my vehicle?” you have the right to inquire with your lender to explain the reasons under the (ECOA). They must explain to you the reason the application was rejected. Bankrate tip

Knowing the reason you were rejected will help improve your chances of getting approval later on. For instance, if you have a credit score that is too low You can work towards improving it before applying again.

The bottom line: While refinancing your vehicle loan could be risky, it is a great way to lower the monthly costs and to continue affording your vehicle. Keep these common mistakes in mind, and keep up-to-date with current information so that you can walk away with the best loan to meet your needs.

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Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers with the ins and outs of securely borrowing money to buy cars. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are committed to helping readers gain confidence to control their finances with precise, well-researched and well-informed details that cut complex topics into manageable bites.

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