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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 research and compare information for free to help you make financial decisions with confidence. Bankrate has agreements with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that appear on this site are from companies who pay us. This compensation may impact how and when products are featured on the site, such as, for example, the sequence in which they be listed within the categories of listing and other categories, unless prohibited by law. This applies to our mortgage or home equity products, as well as other home lending products. This compensation, however, does have no impact on the information we publish, or the reviews that you read on this site. We do not cover the vast array of companies or financial offers that may 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 assisting readers to navigate the details of borrowing money to purchase cars. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to take control of their finances by providing clear, well-researched facts that break down complex subjects into digestible pieces. The Bankrate promises

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This compensation could affect the way, location and when the products are listed within categories, with the exception of those prohibited by law for our mortgage or home equity products, as well as other products for home loans. Other elements, such as our own proprietary website rules and whether the product is offered in your area or at your personal credit score can also impact how and when products are featured on this website. While we strive to provide an array of offers, Bankrate does not include specific information on each credit or financial item or product. Cash-back is similar to a cash-back in that you use it to get better terms and conditions to take over the current loan. However, in addition to that, you will also receive a lump sum of cash as part of the refinance. The amount you receive depends on the equity present on your vehicle. Owners of cars may be interested in this kind of refinance when they’re in dire need of funds for an emergency, but this option comes with the risk of increasing the borrower’s debt. What is cash-back auto refinancing? The cash-back loan refinance permits you to modify your current loan and refinance to an amount that is more than you owe, receiving the additional amount in cash. This kind of loan is usually used by those who need additional funds. It takes into consideration the worth of your car and turns it into cash that you can walk away with. This means that while you refinance your existing loan to new terms, you can get more money in the form of cash when you borrow more than the actual value of the car. Not all lenders offer this service, and it could cause some people to lose their vehicle completely because of the higher chance of being upside down . Over-indebted means that your outstanding loan amount is greater than the value of the vehicle. So, if you owe $4,000 on a car loan, but the car’s value is only $2,000 you’re upside-down with the loan. If you don’t have plans to sell your car, being upside down is not necessarily a problem. You can continue to make the payments and pay off the loan. If on the other hand you plan to sell your vehicle but are in a position of being upside down, that could be a problem. It is necessary to pay off the equity you’re not able to use. How to apply for a cash-back auto refinancing The procedure to apply for a cash-back auto refinance is the same as what you would do for an ordinary . This is a simple process that requires documents and study. After you determine how much your vehicle is currently worth — through outlets such as Kelley Blue Book — you’ll be aware of the amount of equity on the vehicle. This will help you determine the amount of cash you could possibly receive. Finding a lender that provides cash-back auto refinancing will take some time. There are not all lenders that provide this service. After looking into different lenders, compare the conditions and decide which is most suitable for your needs. Pay special attention to the amount of money you will receive. After the application is submitted and loan approval, you’ll leave with new loan conditions and additional cash. When is cash-back auto refinancing a good idea? Determining whether cash-back auto refinance is the right choice that could lead to more financial troubles takes reflection on the way you spend your money. Because this means taking out more cash than what you already owe you are creating more debt. If you’re currently struggling to pay your monthly payments, this may increase your financial burden. The two primary benefits of refinancing cash-back are better loan terms and additional cash. Better loan terms. Similar to traditional refinancing, you’ll receive more favorable loan terms through this process. However, even if it’s possible to reduce the monthly installment, you will just be extending the lifetime of your loan and increasing the overall cost. Cash in addition. You will receive money from the refinance with cash-back which is particularly useful if you require additional cash in case of an emergency. It’s a temporary solution that could lead to more expensive rates of interest. Cash-back auto refinancing is excellent option for those who have faced a financial crisis and require money or to modify the terms of your current loan to suit your lifestyle. What is the maximum amount I can borrow with a cash-back loan? The amount you can get, and consequently the amount of money you will receive, is dependent on a variety of variables. The lender. There are not all lenders that offer a cash-back option due to the increased risk. Value of the vehicle. The value of your car determines the amount your lender will give you. Credit history. Similar to most financial conditions your score on credit and your history serves as the main determinant to determine if your loan will be approved. The higher your credit score, the more favorable terms you can expect to get. Cash-back refinancing risks Before taking the plunge with a cash-back auto refinance, it is important to consider 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 in your loan. As the car’s value depreciates your loan-to-value ratio rises. the chance of becoming underwater — owing more than the vehicle’s worth. Incurring more debt. In fact, borrowing more than you owe stacks even more debt on your plate. Risk of repossession. If you are having trouble making your monthly payments, extending your loan could have not enough of a benefit to solve deeper financial problems. It could be that your car is taken away if you fail to pay. There are a few lenders to choose from. Some lenders do not offer this type of financing , and you’ll be stuck with very few options to choose from when you are looking around. The bottom line is that cash-back refinancing can be a good option for those looking to get better terms on your auto loan or have urgent cash needs. The first step when considering this type of refinance to study the current value of your car. This will let you know the amount of money an lender could be willing to offer. But be aware that there are risks involved in refinancing with cash back. There is a higher risk of debt when refinancing your auto loan to a higher amount than the due and you risk becoming upside-down on the loan and vice versa. Learn more


This article is written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers in navigating the ways and pitfalls of borrowing money to purchase a car. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are committed to helping readers gain the confidence to take control of their finances by providing concise, well-researched and well-researched content that breaks down complicated topics into manageable bites.

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