Car loans are tricky – a single mistake can ruin your financial stability and get you high interest costs later on. So, it’s important that you figure out every part of the loan method and make a smart decision.In terms of analyzing the multiple areas of a car financing, loan term requires a backseat. When you are in the loan industry and confused over deciding the best auto loan rates and offers, do not commit the mistake of ignoring the loan term.
What are the various Car Loan Terms provided by Lenders?
A couple of years ago, the suggested term provided by lenders was 5 years or 60 months. However, the loan tern has altered. Today, you can easily obtain 8 years or 96 months loan. Likewise, there have been instances where one can keep making payments on a vehicle loan for 9 years or 108 months.
Is a Longer Vehicle Loan Term considered as an Advantage for Poor Credit Car Purchasers?
If you are a poor credit car purchaser, you will earn higher interest rates compared to a good credit car buyer. Financial institutions or private lenders know that higher interest rates will make monthly payments difficult for you. So, they offer longer loan terms to make your monthly payments bearable. Does it mean a longer loan term is definitely an advantage? It’s time to know the financial effect of it
The Interest Amount – Assuming you have bad credit score, lenders offers you high interest rates. And, higher interest rates over a long time frame means higher amount of interest
The upside down situation – If you get yourself a short-term auto loan, you can be in an upside down situation for the first couple of years. But, if you decide on a longer loan term, you will owe a lot more than the car’s worth for quite some time; for the reason that you can make smaller payments on a monthly basis.
The Dilemma Selling or Trade-In – If you are within an upside down circumstances, your vehicle has no equity. It is difficult to sell such a car and purchase a new one. Also, it is a challenging job to trade-in the car for another vehicle.
Elevated maintenance cost – If you go for it, you will experience difficulty in selling the car. And, in the event that you keep using the vehicle for more than a few years, you will need to think of the increasing maintenance cost such as higher repair expenses and increasing fuel costs.
When is an extended car loan term ideal to Bad Credit Car Buyers?
- When you have received extremely low interest rates on the loan
- If you can choose substantial amount of down payment and reduce the likelihood of an upside down situation
- If you use your car for a longer period time
There is absolutely nothing wrong in deciding on a longer car finance term. But, it is crucial to determine your situation before making a decision. Remember to look before you leap.
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