Cash-Out Auto Refinance: A Smart Financial Move or a Risky Decision?

Written by
Cash Out Auto Refinance

You might already be familiar with cash-out refinancing for mortgages. But did you know you can go through the same process with a car? If you need extra money, a cash-out auto refinance is one way to get it. But before you make that decision, it can be helpful to learn a bit about the process.

What is cash-out auto refinance?

Some people who have financed a car opt to refinance the loan to get a lower interest rate or other favorable loan terms. A cash-out auto refinance is similar, except you refinance for more than you owe on the car. You then receive the difference between your new loan amount and the balance on your old loan as a lump sum in cash.

If you’re looking to refinance your auto loan (not cash-out), get offers from our trusted MoneyLion partners in less than 60 seconds. Sign up for offers!

How does cash-out auto refinance differ from a regular auto refinance?

With a regular auto refinance, you’re refinancing the balance currently on your auto loan. As a result, you don’t receive any cash. With a cash-out auto refinance, you’re effectively refinancing your car loan, taking out cash, and paying back both at the same time.

Why should you consider cash-out auto refinance?

A cash-out auto refinance can help in several situations:

1. Debt consolidation

If you have multiple sources of high-interest debt — like credit card debt across several cards — a cash-out refinance lets you put them all into a single payment. Just ensure the refinance has a lower interest rate than your existing debt.

2. Home improvement projects

Many home repairs or renovations require a good bit of cash upfront. If you’re taking on a home improvement project, a cash-out refinance is one way to get the funds you need.

3. Emergency expenses

Running into an emergency expense when you can’t afford to pay for it is stressful. A cash-out refinance could help you pay your bills when time is of the essence.

4. Education or career advancement

Education is an investment in your future. If you don’t have the funds to pay for classes or additional training, a cash-out refinance could help you cover it.

How to qualify for cash-out auto refinance

Just like with any other loan, a lender must ensure you can afford to repay your cash-out auto refinance before approving you. Most lenders will look at the following:

  • Your credit score: Some lenders will approve you if you have poor credit, but you’ll usually have a higher interest rate.
  • Your income: The lender needs to make sure you can afford loan payments.
  • Your existing debt payments: In general, your existing debt payments each month shouldn’t be more than 45% to 50% of your monthly income.

Each lender you consider may have different requirements. You can always ask for those requirements before applying. That way, if you don’t qualify, you can save yourself the time and the hard inquiry on your credit report.

How to apply for a cash-out auto refinance

Applying for a cash-out auto refinance involves paperwork similar to any other loan. Your first step should be investigating which lenders can give you a cash-out auto refinance.

You also should ensure you know how much cash you can get. Usually, the lump sum of cash is around the value of your equity. The equity is the value of your car minus the balance you owe on your car loan.

Before agreeing to any loan, take a close look at the length of the loan term and the interest rate you’ll have to pay. Using an online loan calculator to see how much you’ll pay over time is a good idea.

Will a cash-out auto refinance affect your credit score?

Refinancing your car this way may have the same credit score impact as any other loan. Your score may drop a few points. And if you take on more debt, your score could decrease, too. But having a paid-off loan on your account may boost your score.

If you are working on building up your credit or improving your credit score, MoneyLion is here to help! Credit Builder Plus* (CB+) is our powerful credit-building membership, and it’s designed to help our members build or repair their credit, save, establish financial literacy and track their financial health.

CB+ can help you build or improve your credit with access to a Credit Builder Plus loan. A Credit Builder Plus loan is a small loan that is held in a secure account while you make monthly payments. As you make payments, they are reported to the major credit bureaus, which can help boost your credit score with on time payments. Plus, you could get access to some of the loan funds as soon as they are approved, so you can use them for whatever you need.

CB+ is a smart way to help improve your credit while paying off your debt. By improving your credit score, you can qualify for lower interest rates on future loans or refinancing options. And by paying off your Credit Builder Plus loan on time, you could reduce your debt-to-income ratio, which could also help improve your credit score.

Other things to consider with cash-out auto refinance

A cash-out auto refinance can help you get funds when you need them, but there are drawbacks to consider. Long loan terms and high interest rates may lead to you paying hundreds or thousands of extra dollars over time. 

It’s also important to consider a scenario where you can’t repay your lender. If this were to happen, the lender could take possession of your car.

Alternatives to cash-auto refinance

If you need extra money, it’s worth considering some of the other options available:

1. Personal loan from a bank or credit union

Many banks and credit unions offer personal loans for debt consolidation, emergency expenses, and more. 

MoneyLion offers a service to help you find personal loan offers based on the info you provide, you can get matched with offers for up to $50,000 from top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you. You can also use the loan funds to pay off other existing debts.

MoneyLion is here to help.

2. Peer-to-peer lending platforms

When you use one of these platforms, a person can lend you money. Peer-to-peer networks are a great option if you don’t qualify for a traditional personal loan.

3. Credit card balance transfers

Some credit cards have balance transfer options, meaning you can take the balance on another card — and sometimes, the balance of an auto loan — and put it on the new card. If the card has a lower interest rate than your car loan, it can save money over time.

Is a cash-out auto refinance right for you?

If you need extra money in a pinch, a cash-out auto refinance might help. These loans may help you access funds you couldn’t otherwise. But before you get one, take a close look at the interest you’ll pay over time and consider what could happen if you don’t pay.


Is it possible to get a cash-out auto refinance if I have bad credit?

You can, but like with any other loan, it’s harder to get approved with bad credit.

How much cash can I get through a cash-out auto refinance?

You usually get an amount close to your equity in your car — the present value of the car minus what you still owe on your car loan.

Can I refinance a leased car and get cash out?

No — lease agreements can’t be refinanced like auto loans can.

Sign Up
Sign Up

Fast, interest-free advances anytime

Get Instacash advances up to $500 for everyday expenses or life’s surprises. There’s no credit check, no monthly fee, and no interest.

Sign Up