When you take out a car loan, the lender agrees to provide the funds needed to purchase a vehicle, and you promise to repay them in a timely manner.

But financing a car isn't as simple as a personal loan from a friend when you borrow money and then pay them back the exact amount. An auto loan is a specific type of loan tailored to help people pay for a vehicle. 

Several loan options exist when you finance, like the down payment, interest rate, APR, and term length. Each element determines both what you pay per month and the total loan amount during the term length. 

Usually, buyers make a down payment to reduce the sum of money they finance. This lowers their monthly payments and makes them more attractive borrowers, which could lead to better loan terms. 

The interest rate on a car loan is a set percentage of the principal amount of money you borrow. When you take out a $30,000 loan with a 5 percent interest rate, that percentage contributes to your total monthly payment during the term. 

A car loan's APR consists of the interest rate plus any fees or charges the lender adds. APR is short for the annual percentage rate and provides a more comprehensive picture of how much money you'll owe during your loan term. 

The typical loan term is 36-72 months, though some go for as long as 84. 

The longer the loan term is, the lower your monthly payments are, which could allow you to purchase something more expensive than you'd initially planned. 

Though buying a car can be a lot of fun, applying for financing can be a hassle. It's hard to know who to trust and where to find the best loan for you. But Shift makes it easy, working with a network of trusted lenders who compete for your business, so you get the best deal on financing. Applying for financing with Shift is simple, with no cost or obligation. If you have low credit, don't worry because Shift welcomes co-signers. And Shift offers fair, no-haggle prices driven by powerful machine learning algorithms and tons of data, so you know you're getting a great deal on your next vehicle.

A cash-out refinance lets you rework the terms of your auto loan, including borrowing a more significant amount, and you come away with extra cash to spend. 

Traditionally, car buyers refinance loans if they want better terms. Maybe they've improved their credit score, or lower interest rates became available. Lower refinance rates can help reduce borrowers' month-to-month expenses. 

However, a cash-out refinance intends explicitly to provide the borrower with extra funds to meet obligations beyond their auto loan. 

With a cash-out refinance, the loan recipient agrees to borrow a higher amount than the initial sum, accounting for what they still owe while also giving them additional money to spend however they want. 

When you cash-out refinance, the terms vary depending on the lender, how much equity you've built up, and your credit score. And since you're borrowing against the value of your vehicle, a lender might want to inspect it first to be sure of its condition and worth. 

Once you complete a cash-out refinance, you'll have the additional funds you need for monetary obligations, big and small, while also securing an updated agreement to pay off your vehicle.

Cash-out refinancing a loan offers both positives and negatives, and it's up to you to decide if one works for you.

On the plus side, a cash-out refinance has the potential to net you a lower rate on a new loan while also providing you with the necessary cash for your financial needs. You could even receive a lump sum payment, giving your bank account a quick boost. 

However, if you decide to apply for a cash-out refinance, higher interest rates may increase your monthly payments. You also run the risk of becoming upside-down on your car loan, another term for owing more than it's worth. 

And any time you borrow additional money, you increase your debt, adding to your total financial obligations. 

If you decide a cash-out refinance on your existing loan isn't the best option, several alternatives exist. 

Say you're in a difficult financial situation and want to consolidate your credit card debt. Performing debt consolidation with a zero-percent credit card could be an intelligent choice. But you'll have to pay it off before the promotional period ends, or you could owe significant interest. 

Standard refinancing of your auto loan is another viable alternative to a cash-out refinance. You may be able to secure a lower interest rate or extend the term length, resulting in lower monthly payments.

Buying a car is full of financial decisions, like selling or trading in your old vehicle. While trading in your old vehicle offers the most convenience, where can you go to get the most money for it? Shift makes trading in your used car easy. All you'll have to do is enter the make, model, year, and mileage on Shift's easy-to-use website, and you'll instantly receive a purchase offer that's valid for seven days. You can get a fair offer, better than at the dealership, driven by powerful machine learning algorithms and tons of data. With Shift, there is no need to spend the extra time waxing and washing the car. A little dirt won't affect the quote, and we fully detail the cars ourselves before listing them for sale.