Cash-back auto loan refinance allows you to borrow more than you owe on your current loan and receive the difference in cash.
Because the loan is secured by your car, interest rates may be lower than other sources of cash, such as a credit card, payday loan or personal loan.
Not all auto refinance lenders offer the option to take cash. If you qualify, refinancing by itself can lower your monthly payment or shorten your loan, even if you don’t take extra cash.
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The amount of cash you can borrow depends on your equity — the difference between the value of your car and what you owe on it.
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The value of the car can be dependent on the source the lender uses.
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You may be able to borrow up to 100% or more of the equity in the car if your credit history and ability to repay the loan support it.
Approach cash-out refinancing with caution. If you fall behind on the new loan, you could lose your car. And if it is stolen or totaled in an accident, your car may have depreciated enough so that the payoff amount may not repay your loan.
This post was originally published on Nerd Wallet
