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 choices by offering interactive tools and financial calculators as well as publishing reliable and original content. We also allow you to conduct research and compare data for free to help you make financial decisions with confidence. Bankrate has partnerships 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 site come from companies who pay us. This compensation may impact how and where products appear on the site, such as such things as the order in which they be listed within the categories of listing, except where prohibited by law for our loans, mortgages,, and other products for home loans. However, this compensation will have no impact on the information we provide, or the reviews you read on this site. We do not contain the vast array of companies or financial offers that may be available to you. Tom Werner/Getty Images
3 min read . Published February 24, 2023
Authored by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in helping readers with the ins and outs of securely borrowing money to purchase an automobile. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are committed to helping readers gain the confidence to take control of their finances through providing precise, well-researched, and well-written facts that break down complicated subjects into digestible pieces. The Bankrate promise
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There are money-related questions. Bankrate has answers. Our experts have been helping you master your finances for over four decades. We strive to continuously give consumers the professional guidance and the tools necessary to make it through life's financial journey. Bankrate adheres to strict standards standard of conduct, which means that you can be sure that our information is trustworthy and accurate. Our award-winning editors, reporters and editors create honest and accurate information to assist you in making the right financial decisions. The content created by our editorial staff is objective, factual and uninfluenced through our sponsors. We're transparent about the ways we're capable of bringing high-quality information, competitive rates and useful tools for you by explaining how we earn our money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain hyperlinks on our site. So, this compensation can affect the way, location and in what order products are listed, except where prohibited by law for our mortgage home equity, mortgage and other products for home loans. Other elements, such as our own proprietary website rules and whether the product is offered in your region or within your self-selected credit score range could also affect the manner in which products are featured on this website. Although we try to offer an array of offers, Bankrate does not include the details of each credit or financial products or services. If you are having trouble making your current loan payment, replacing your current auto loan with a new one -- can be an excellent method to save money and remain behind the wheel of your vehicle. But there are some common mistakes to avoid so that you don't get into yet another financial crisis. Seven mistakes to avoid when refinancing your vehicle. Avoid these common pitfalls when refinancing your vehicle loan. 1. Do not check refinancing requirements. Lenders have specific requirements in refinancing. Check for requirements pertaining to the car's age, miles and even the amount left in the loan. For instance, lenders usually will require a minimum of six months paid for the loan and a remaining amount of $3,000-$5,000 to refinance. Bankrate tip
You can find specific refinancing guidelines on the banks' websites as well as Bankrate's .
2. Not checking with your current lender first . While your current lender might not have the lowest rates, it's the most effective place to begin. Before exploring refinancing options outside the current lender it is advisable to approach them and explain your situation to see if they can help. Some lenders offer , which changes the terms, the due date for payments or the interest rate to provide borrowers with financial relief. Tips from Bankrate
Even if you still follow through with refinancing your loan It is possible that they'll offer more than the new lender might.
3. The extension of your loan time too much. Refinancing is a way to reduce costs, however if you extend your loan excessively, you could spend more money over the loan's lifetime. While a will mean lower monthly payments but you'll also be paying more interest. Tip from Bankrate
Before adjusting your term Take advantage of auto refinances to ensure you save money.
4. Don't take into account your credit score As with most cases regarding loans, the credit score is used as the main determinant for approval. Therefore, you must improve your credit and before you refinance your loan. You're more likely to get the loan you want and get an improved loan overall. Credit scores of 670 and greater generally qualifies borrowers to the highest interest rates. Bankrate tip
Check your credit ahead of loan applications by using AnnualCreditReport.com.
5. Only shopping with only one lender As you would when shopping for your initial auto loan We suggest comparing at least three lenders. So, while signing off on the first loan offer may be tempting, not all options are all created equally. Ultimately, the lower your interest rate the less you'll pay for your car loan. It is important to make sure you're getting the best deal out there. Tips for Bankrate
Compare current rates offered by a range of lenders. Be aware of the eligibility requirements, repayment options and how it stacks up against your current loan.
6. Being upside down on your loan Before refinancing, make sure you know where the equity of your car lies with a . Equity is the amount at which the value of your vehicle is greater than the amount you have to pay on the auto loan. If you owe more than the value of your vehicle or have negative equity refinancing your loan is probably not the best choice. Tips from Bankrate
Don't refinance a vehicle you're not able to pay for. Find out where you may be overextending and calculate expected expenses prior to signing the new loan.
7. Refusing to accept your first rejection Auto loan refinancing guidelines differ from lender to lender Therefore, just because you were rejected by one 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 inquire with your lender to explain the reasons under the (ECOA). They must tell you why your application was denied. Bankrate tip
Knowing why you were denied will help improve your chances of being approved later on. For instance, if your credit score is too low, you can work towards improving it before you apply again.
The bottom line While refinancing your car loan could be risky but it's a great method to cut down on the monthly costs and to continue financing your vehicle. Be aware of these mistakes common to all in mind and be up-to-date on the latest trends to ensure you walk away with the right loan for your requirements.
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This article is written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ways and pitfalls of borrowing money to purchase an automobile. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers gain confidence to take control of their finances by providing concise, well-studied facts that break down otherwise complex subjects into bite-sized pieces.
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