Common car refinancing mistakes to avoid Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial decisions by offering interactive financial calculators and tools that provide objective and unique content. This allows you to conduct your own research and evaluate information for no cost – so that you can make financial decisions with confidence. Bankrate has agreements with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The offers that appear on this website are provided by companies who pay us. This compensation could affect how and where products are displayed on the site, such as for instance, the order in which they may appear within the listing categories in the event that they are not permitted by law for our loans, mortgages,, or other home loan products. However, this compensation will not influence the information we publish, or the reviews you read on this site. We do not cover the vast array of companies or financial offerings that could be available to you. Tom Werner/Getty Images
3 min read . Published 24 February 2023
Authored by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers to navigate the ins and outs of securely taking out loans to purchase an automobile. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are committed to helping readers gain the confidence to take control of their finances with precise, well-researched, and well-written information that breaks down otherwise complex topics into manageable bites. The Bankrate promises
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There are money-related questions. Bankrate has the answers. Our experts have been helping you master your money for over four years. We continually strive to give consumers the professional guidance and the tools necessary to make it through life’s financial journey. Bankrate adheres to strict standards policy, which means you can be confident that our content is honest and precise. Our award-winning editors and reporters provide honest and trustworthy information to assist you in making the best financial decisions. The content we create by our editorial staff is objective, factual and uninfluenced from our advertising. We’re open about how we are in a position to provide quality information, competitive rates and useful tools for our customers by describing how we earn money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for the promotion of sponsored goods andservices or by you clicking on certain links posted on our site. This compensation could impact how, where and when products are listed in the event that they are not permitted by law. This is the case for our mortgage or home equity products, as well as other home lending products. Other factors, such as our own rules for our website and whether or not a product is available within the area you reside in or is within your personal credit score can also impact the manner in which products are featured on this website. We strive to offer a wide range offers, Bankrate does not include details about each credit or financial product or service. If you’re having difficulty making your current loan payments, changing your current auto loan with a new one can be a great option to save money while you remain behind the wheel of your car. However, there are a few common mistakes to avoid so that you don’t end up in yet another financial crisis. The top seven mistakes in refinancing your car Avoid these common pitfalls when refinancing your vehicle loan. 1. Do not check refinancing requirements. Lenders hold specific in refinancing. Keep an eye out for requirements pertaining to the car’s mileage, age and the amount left to repay the loan. For instance, lenders typically require a minimum of six months paid on the loan and a balance of between $3,000 and $5,000 to refinance. Bankrate tip
There are specific refinancing requirements on lenders’ websites or Bankrate’s .
2. Do not contact your current lender initially. Although your current lender might not have the most competitive rates, it’s the best place to begin. Before you look into refinancing options that aren’t offered by the current lender, it is wise to approach them and explain your situation and see if they could help. Some lenders offer , that alters the terms, the due date for payments or the interest rate to provide borrowers with financial relief. Tips from Bankrate
If you do go the process of refinancing your loan there is a chance that they can offer you a better deal than an existing lender could.
3. The extension of your loan term too long The purpose of refinancing is to reduce costs, however if you extend the term of your loan too much and you are spending more money over its duration. Although it will result in the payment will be lower however, you’ll also have to pay more interest. Tip from Bankrate
Prior to term adjustment Take advantage of auto refinances to ensure you save money.
4. Not considering your credit In most cases of loans, the credit score score serves as the primary factor in approval. Therefore, you must improve your credit and prior to you refinance your loan. You’ll have a better chance to get the loan you want and get an improved loan overall. If your credit score is 670 or greater generally qualifies borrowers to the highest interest rates. Tip from Bankrate
Check your credit ahead of loan applications by using AnnualCreditReport.com.
5. Shopping with just only one lender As you would when you are shopping for your first auto loan We recommend that you compare at least three lenders. Therefore, even though signing on the first loan offer might be appealing, not all loans are made equal. In the end, the lower your interest rate, the less you’ll pay for your car loan. You want to ensure you’re getting the best deal that is available. Bankrate tip
Compare the rates currently offered by a range of lenders. Pay close attention to the conditions for approval, the repayment options, and how it compares to what you currently have on your loan.
6. Being upside down on your loan Before refinancing, check whether the equity on your vehicle lies with a . Equity is the amount at which the value of your vehicle is greater than the amount you owe for the loan. If you are owed more than your car is worth, or hold negative equity refinancing your loan is probably not a good idea. Bankrate tip
Do not refinance a car you aren’t able to afford. Check where your may be overextending and estimate the costs before signing off on a new loan.
7. Don’t give up after the first rejection Auto loan refinancing requirements differ between lender to lender So the fact that you’ve been denied by one lender doesn’t mean you’ll be rejected by all. If you’re asking, “Why can’t I refinance my car?” you have the right to ask your lender to explain the reasons under the (ECOA). They must explain to you the reason your application was not approved. Bankrate tip
Understanding why you were denied can help you improve your chances of getting approval for the next time. For example, if you have a credit score that is low You can work towards improving it before applying next time.
The bottom line While refinancing your car loan can come with risks but it’s a great method to cut down on your monthly cost and continue paying for your car. Keep these common mistakes in mind and stay up-to-date on the latest trends to ensure you walk away with the most suitable loan for your needs.
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This article is written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers to navigate the ways and pitfalls of taking out loans to purchase cars. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to manage their finances with concise, well-studied information that breaks down otherwise complicated topics into digestible pieces.
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