Checking | Auto Loans | Mortgage | HELOC | Personal Loans | Credit Cards | Membership

Cash-out auto loan refinancing: How does it work?

Refinancing an auto loan could be a smart financial move under certain circumstances. For example, if you have lost your job or are struggling to afford your current car payment, a cash-out auto refinance loan could help you lower your payment and better manage your budget.

Not all vehicle loan lenders will let you refinance your loan and get cash out. Whether or not you can get cash depends on how much equity you have in your car, your credit score, and the lender’s unique requirements.
A cash-out auto refinance gives you a new loan which pays off and eliminates your first loan. The new loan would include an extra sum of money that you receive at closing.
At Credit Union of Southern California (CU SoCal), we make buying a vehicle in California easy.
Call 866.287.6225 today to schedule a no-obligation consultation and learn about our auto loans, home equity lines of credit, personal loans, checking and savings accounts, and other banking products. As a full-service financial institution, we look forward to helping you with all of your banking needs.
Read on to learn more about a cash-out auto refinance and how to pull equity out of your car.

Get Started on Your Auto Loan!

What is cash-out auto loan refinancing?

A cash-out auto refinance is different than traditional auto loan refinancing, in that you are asking the lender to loan you cash based on the equity in your vehicle.
Getting cash out means that you will have a larger loan amount than if you only refinanced your remaining loan amount. Thus, you will be paying interest on a higher total amount, even if you are able to secure a lower interest rate than you already have.
The main reasons why car owners would refinance a car loan to get cash are to lower their interest rate and get money that can be used for other expenses, such as paying off bills and other debt at a lower interest rate than what credit cards typically charge.

How much can I cash out?

The amount you qualify to receive as cash will be decided on by the lender based on your credit score, the value of the vehicle, and the amount you owe on the vehicle.

How many times can I refinance a car?

There are technically no limits on how many times you can refinance a car loan or do a cash-out auto refinance.

However, there are some potential downsides to keep in mind:
  • Some lenders won’t do a refinance on a car that is more than eight years old or has more than 100,000 miles.
  • Refinancing your car can potentially hurt your credit score.
  • Some lenders charge a large pre-payment penalty for paying off a vehicle loan early, so contact your current lender and ask if this is something you can do.

How to do a cash-out auto loan refinance:

  1. Know your car's current value. A car dealer can provide you with a good idea of what your car is worth. Or, you can check for yourself using one of the many vehicle valuation websites such as Edmunds or KBB.
  2. Calculate your car's equity. Once you know the value of the car, just subtract the amount you owe from the value of the vehicle.
  3. Check your credit score. You can get copies of your credit reports and your credit score from each of the three top credit bureaus: Equifax, Experian, TransUnion.
  4. Check lender requirements. Each lender will have their own requirements for traditional refinancing and refinancing with cash-out.
  5. Apply for auto loan refinancing. Once you’ve found an interest rate and lender that you’re happy with, the next step is to complete an application.

Is cash-out auto refinancing worth it?

Cash-out auto refinancing may be worth it if you can qualify for an interest rate that is lower than your current rate, and you can get this rate from a lender who is willing to provide cash-out.

Advantages of cash-out auto loan refinancing:

  1. Better loan terms. A lower interest rate can save you hundreds of dollars each year, even if you do cash-out, which results in a higher loan amount than you had before.
  2. Access to cash. If you are paying high interest on credit card debt and need extra money to pay off the debt or consolidate various other high-interest loans, then a cash-out auto refinance can

Disadvantages of cash-out auto loan refinancing:

  1. Interest rate too high. Lenders know that the higher the loan amount the more risk they are taking on. To compensate for risk, lenders charge interest. It’s never a good idea to refinance to a loan that’s at a higher interest rate just to get access to more cash.
  2. You risk becoming upside down on your loan. All vehicles depreciate in value over time, and as yours loses value you could end up owing more money than your vehicle is worth.
  3. More debt. Taking cash out over and above the amount you owe on your vehicle means you’ll be taking on more debt. Before you go through with a cash-out refinance make sure you’ll be able to pay the new monthly payment.
  4. Repossession. A vehicle loan is a secured loan, meaning that your car is used as security for the loan that is given by the lender. If you make too many late payments or fail to repay the loan, the lender can repossess your vehicle.
  5. Decrease in credit score. Applying for a new loan and applying with several lenders may decrease your credit score temporarily.

Alternatives to cash-out auto loan refinancing:

  • Traditional auto loan refinancing. Getting a cash-out auto refinance may cost too much in the end or bring with it too much financial risk. However, refinancing your car loan is always an option.
  • Auto equity loan. Some lenders will provide a loan based on the equity in the vehicle. A cash-out refinance is not needed for this option.
  • Debt consolidation. This can be accomplished through a personal loan or by doing a balance transfer to a low interest rate credit card, such as the CU SoCal Topaz Visa card.
  • Personal loans. Many personal loan options are available, with low interest rates and flexible terms.
  • Ask friends and family for help. If it’s cash you need, carefully consider asking friends and family if they can give you a small loan that you’ll repay. This can be a quick way to get money, however, borrowing from family or friends can have challenges. To avoid bad feelings and discrepancies in the loan conditions, you may want to create a document stating the conditions and duration of the loan and whether or not you are expected to pay interest, and if so, at what rate. You and the family Member or friend should agree to the terms and sign the document. Accepting loans from family Members or friends could negatively impact your relationships.
Learn more about how to refinance a car.

Why Savvy Consumers Choose CU SoCal

For over 60 years CU SoCal has been providing financial services, including car loans, mortgages, Home Equity Loans, HELOCs, personal loans, credit cards, and other banking products, to those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County.
Please give us a call today at 866.287.6225 today to schedule a no-obligation loan consultation with a CU SoCal Member Services specialist.

Get Started on Your Auto Loan!

Help + Support


Co-Browsing Code

Building Better Lives

Credit Union of Southern California (CU SoCal) is a leading financial institution empowering those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County to reach their goals and build strong financial futures. CU SoCal provides access to convenient money management services and offers competitive rates and flexible terms on auto loans, mortgages, and VISA credit cards—turning wishing and waiting into achieving and doing.


562.698.8326 | 866 CU SoCal Se Habla Español