388 King George Rd, Brantford, ON, N3T 5L8
My Garage

Cash-Out Refinancing A Car Loan In Guelph

Cash-Out Refinancing A Car Loan In Guelph

Cash-out refinancing a car loan is where you use any equity in your car to provide cash for something else. It’s an option for raising money if you need it and can provide a safety net should you need it.

 

Our Guelph auto loan team explains what cash-out auto refinancing is and whether it’s a good idea or not.

 

Cash-Out Refinancing A Car Loan In Guelph

 

As we mentioned in the intro, cash-out refinancing is a way to use any equity you have in your car to provide cash. You can use that cash for whatever you like.

 

The term actually comes from mortgages where cash-out refinancing is often used to free up cash for other needs. It appeared in the auto industry a few years ago and seems to be quite popular.

 

For example, your car is valued at $25,000 and you have $9,000 left on the loan. That means you have $16,000 in equity. You could use an auto loan to free up some, or most of that equity as cash to use however you like.

 

It will mean starting an auto loan all over again and tying up your car in another loan but it can provide quick cash at a reasonable rate.

 

Pros of cash-out auto refinancing

 

There are a couple of upsides to cash-out auto refinancing:

 

Can free up large amounts of cash quickly – You can free up however much equity is in your car relatively fast as long as your credit score supports it.

 

Low interest rates – Auto loans can be cheaper than personal loans and are definitely cheaper than many other forms of lending.

 

Lower monthly payments – Auto loans are for longer periods of time, which usually equates to lower monthly payments than other forms of lending.

 

Cons of cash-out auto refinancing

 

It isn’t all good news though:

 

More interest paid over the term – Loan interest is calculated annually so the longer it’s running, the more you’ll pay over the term of the loan.

 

Your car could be at risk – The loan uses your car as collateral and as you’re borrowing against it, your car is at risk if you miss a payment.

 

New loan on older car – If you have had your car for a while, you’re paying a new loan on a car that’s at least a few years old.

 

How to use cash-out auto refinancing

 

You can use this method to raise cash any time you like. It’s a very similar process to applying for a standard auto loan in Guelph. You need to have a sufficient credit score for the amount you want to borrow, be in good financial health and be able to afford the repayments.

 

Your car also needs to be in good condition and will likely need an inspection in order to qualify for the loan.

 

Lenders won’t always give you 100% of the equity in your car but some will. The rate you get will depend on your credit score but should be competitive with standard auto loan rates.

 

If you need help with cash-out auto refinancing or any type of auto loan, contact our team.

 

When you’re ready for a car loan, get in touch with the Guelph auto loan experts at Northway Ford for great deals on auto finance.

 

Be sure to connect with us on Facebook, Twitter, Instagram, or LinkedIn to stay up to date on our latest great articles!

Categories: Car Loan

Tags: ,