What You Need to Know (2022)

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With automatic cash refinance, you can pay off your existing car loan and withdraw some of the equity in your vehicle in cash. You will have more debt overall, but it can be a good decision if you can get a much better interest rate and keep the loan term relatively short.

We at Home Media’s review team have compared the best auto refinance rates, and we recommend that you consider cash-in refinancing alongside traditional refinancing options. Here we will discuss the advantages and disadvantages of automatic cash-in refinancing.

What is Automatic Cash-out Refinancing?

Automatic refinance with cash-out lets you take money out of your vehicle’s equity and use it for whatever you want. It’s a type of refinance auto loan, which means that you take out a new loan to repay the old one. What’s unique about cash-in refinance is that the new loan is larger than what you owe on your vehicle, and you get the difference in cash.

Traditional automatic refinancing or cash-out

With traditional refinancing, you just pay off what’s left on your current car loan, ideally at a lower interest rate. The main benefits of car refinancing are saving money on interest and having a lower monthly payment.

Automatic cash-out refinancing makes it much more difficult to both save money and have a lower payment. This is because you are adding to the debt owed. You will need to get a much better interest rate or make higher monthly payments to save on interest compared to your existing car loan.

Advantages and disadvantages of automatic cash-in refinancing

Automatic cash-out refinancing may or may not be a good idea depending on your financial situation. Here are the basic pros and cons of a cash-out refi:

How much money can you get?

With automatic cash refinance, you can usually withdraw an amount up to the equity in your vehicle. You can find your vehicle’s equity by subtracting the remaining debt from the vehicle’s value. Some lenders will finance up to 80% of the value of your vehicle, and others up to 100%. Some will even allow you to borrow more than 100%.

Cash-out Auto Refi Example

Let’s say your car is worth $20,000 and you have $12,000 left on your loan. This means you have $8,000 of equity in your vehicle. If you withdrew all of the $8,000 in cash, you owed $20,000 on the new auto refinance loan. If the lender only financed up to 80% of the value of your car, you would instead get a maximum of $4,000 in cash.

Even though most financial institutions won’t allow you to get a loan for more than the value of your car, you can still risk getting upset if you extend your repayment term too long. Your loan would be automatically reversed if you took more than the value of your car (we recommend you avoid this).

Check the value of your car

Use tools like Kelley Blue Book or the National Automobile Dealers Association to check your car’s value. You can enter the Vehicle Identification Number (VIN) of your car to get an accurate estimate based on mileage and condition. This will give you an idea of ​​the type of loan approval you can expect for the value of your car.

Lenders will verify the value of your car with industry books or request an in-person inspection of your vehicle.

Is automatic cash-out refinancing a good idea?

Automatic cash-in refinancing is only a good idea if you can get a better rate and keep the loan term relatively short. This will likely mean that your monthly payments will stay about the same or increase. You are adding more debt, after all. This is why cash-out refinancing is not a smart way to just get extra pocket money.

Get a better interest rate

If you can’t get a better annual percentage rate (APR) on an auto refinance loan with drawdown, we don’t recommend getting a new loan. Increasing your debt at the same rate will force you to pay more interest, and refinancing is not a long-term solution to cash flow problems.

Keep the loan term short

With automatic cash refinancing, it’s hard to pay less interest overall and get smaller monthly loan payments. You can get a lower monthly payment by extending the term of the loan, but you’ll pay more for the vehicle at the end.

To save the most money over the term of the loan, consider increasing your payment amount to pay off the debt as soon as possible. However, make sure you can afford the monthly payments. If you default on this type of loan, you risk losing your car.

Can you consolidate your debts with an Auto Refi Cash-out?

It is possible to use a cash refinance loan to consolidate debt. This only works if you can get a loan with a better interest rate than your other debts. For example, if you have a credit card with a balance of $3,000 and an interest rate of 15%, it might be a good idea to pay it off with a refinance loan at a rate of 7%.

The risk is due more than your car is worth. With a personal loan or debt consolidation loan, default is the only event that would trigger full repayment. But when your car is covered, a total loss requires the insurance company to pay the value of the car and you to cover the rest.

Alternatives to Automatic Cash-out Refinancing

If you decide that automatic cash-out refinancing isn’t right for you, there are other options for paying off your car loan.

Traditional refinance loans


If interest rates are better now than when you bought your car, a traditional auto refinance loan might be the answer. This could lower your payments, giving you extra cash each month. Traditional automatic refinancing could also reduce the total amount of interest you pay.

Personal loans

Personal loans tend to have higher interest rates than car loans because they are not secured by collateral. But borrowing $2,000 and paying it back in the short term might be better than adding $2,000 to the debt of a car loan secured by a depreciating vehicle.

The essential

Carefully consider cash-out refinancing, as you may end up owing more than your car is worth. We recommend getting a car refinance loan with withdrawal only if you can:

  • Get a significantly better interest rate
  • Avoid extending the term of the loan
  • Make larger payments to save on interest charges

Always check your current loan disclosures to see if there is a prepayment penalty. If so, you will be charged a fee for prepaying your existing loan.

Our recommendations for auto loan refinancing

Decide when to refinance a car – whether with a traditional refinance loan or a cash refinance loan – largely depends on the interest rates available to you at any given time. Compare reputable companies like Auto Approve and myAutoloan to find the best car loan rates.

Automatic approval: first choice for refinancing

Auto Approve specializes in auto loan refinancing for cars, trucks, SUVs, RVs, boats and ATVs. Its refinance rates start at 2.25% for borrowers with the best credit scores. The company has a A+ rating and accreditation from the Better Business Bureau, as well as an average rating of 4.4 stars out of 5.0 based on customer reviews on the organization’s website.

Find out more in our Automatic Approval Review.

MyAutoloan: best low rate option

The myAutoloan financing marketplace connects borrowers to a network of lenders that includes credit unions, banks and dealerships. With a single prequalification request, you can see up to four loan offers. The company offers automatic refinance rates as low as 1.99% for borrowers with good credit history.

Find out more in our myAutoloan review.

Our Methodology

Because consumers rely on us to provide unbiased and accurate information, we’ve created a comprehensive rating system to formulate our ranking of the best car loan companies. We’ve collected data on dozens of loan providers to score companies on a wide range of ranking factors. The end result was an overall score for each vendor, with the companies scoring the most points at the top of the list.

Here are the factors taken into account by our assessments:

  • Reputation (30% of total score): Our research team considered ratings from industry experts and each lender’s years in business to assign this rating.
  • Availability (20% of total score): Companies that cover a variety of circumstances are more likely to meet the needs of borrowers.
  • Loan details (15% of total score): We considered the loan types, terms and loan amounts available from each lender to determine this score.
  • Prices (25% of the total score): Auto loan providers with low APRs scored highest in this category. Available discounts have also been taken into account.
  • Customer experience (10% of total score): This score is based on customer satisfaction ratings and transparency. We also considered the responsiveness and helpfulness of each lender’s customer service team.

*Data correct at time of publication.

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