One
of the important things that will define your car buying journey will
be the length of your auto loan. An auto loan term is the time period in
which you will repay the loan. Short-term auto loans vary between 12 to
60 months and long-term auto loans range between 72 to 84 months or
above. Before you decide on the period of the loan, understand the
implications of making a decision.
Which Auto Loan Term Is More Advantageous to You?
1) Short-Term Auto Loan
Advantages:
One of the biggest advantages of choosing a short-term auto loan is
that the loan is paid off earlier as compared to a longer term. It will
make you less debt-ridden tomorrow. It attracts lower interest rates
which means you are eventually paying less towards obtaining an auto
loan. A short-term auto loan will also decrease your chances of being
upside down and help you to build your equity at a faster pace compared
to the other options.
Disadvantages:
It has a high monthly payment. A certain part of your monthly income
will be tied up towards making payments for the auto loan. It can be
comfortable only if you have put a good amount of money down. Down
payment can help you to attain a successful completion of a short-term
auto loan.
2) Long-Term Auto Loan
Advantages: As
a long-term auto loan is stretched for more than 5 years, the monthly
payment is relatively lower compared to a loan that can be paid off
quickly. Another advantage of choosing it is the flexibility to make
payments, i.e., you can refinance your auto loan and increase the
monthly payment amount to pay off your auto loan early.
Disadvantages:
A long-term auto loan is not ideal as you risk being upside down for a
long time. Usually refinancing is possible when your car does not have
any negative equity, which is rare when you spend several years making
low payments. Therefore, it becomes a task to refinance, sell or trade
in a car with a long-term auto loan. Also, once your warranty runs out,
it can become difficult to make expensive repairs to the car.
Additionally, it will attract high interest rates, thereby increasing
the cost of the auto loan.
Being Far Sighted: How do you choose an Auto Loan?
Comparing
the points above, a long-term auto loan is suitable for someone who can
risk a high interest rate in order to receive flexible payment options.
Short-term auto loans are the ideal option only if you can manage the
payments. Early repayment of the loan means that you will require a good
down payment and the ability to make big payments every month. A loan
period spread over several months makes sense for you if you want to
make payments that are easy on your wallet. The auto loan option that
you choose depends on your current financial circumstances and your
ability to successfully make payments in the future.
Whether
you want to go for a short-term auto loan or a long-term option, the
choice is yours! Discuss your loan requirements beforehand. It’s time to
find low rate car financing with just a click of a mouse. Apply now for bad credit auto loan approval.
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