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For some people, it’s impossible to purchase a car and pay its full price in cash. And if you find yourself in the same situation, then you might find car loans a feasible option to acquire a new vehicle. While it’s safe to choose a lender who offers the lowest interest rates, there’s another factor that can affect your loan repayment, which is your car’s loan length.
Normally, the maximum length given for this kind of loan is six years (72 months) but some borrowers choose to have a lower monthly payment so they push it up to 7-8 years. However, while it seems easier for your monthly budget to cover, you are actually spending a lot on the interest. Therefore, before you go for a longer repayment term, or even apply for the loan, you should read this guide first.
The Length Of Your Car Loan
Choosing the length of your car loan can be tricky but basically, the rule of thumb for this is: your repayment term should be as long as how you plan to keep your car. Therefore, if you’re someone who wants to change autos often, then a shorter repayment term is advisable.
Unlike homes, your car’s market value decreases the moment you use it, and it will drop faster from time to time. Therefore, it’s not practical to owe a loan amount that’s higher than its resale value.
Car Financing Loans
Some car loan providers will allow a two-year repayment term for new cars but it can also be as long as eight years. Meanwhile, for second-hand cars, it can be between three to five years. No matter how long you’re planning to pay the loan, you should consider a very important thing: the interest rate.
The length of your car loan directly affects the interest rate applied to your advance so it’s best to settle it in the soonest possible time. Obviously, the monthly payment will be higher compared to long-term loans but it will help you save hundreds or even thousands on the interest. In addition, it pays off quickly so you can have the peace of mind you need when driving your new auto.
Car loans are a type of loan which allows you to purchase a vehicle of your choice, or a vehicle that is offered for purchase by a specific lending company, using their own money instead of yours. In a nutshell, you borrow money from a lending company or firm in order to purchase a vehicle. You will then have to pay back the company for the total value of the purchased vehicle, on top of accrued interest that will be accumulated in the span of time that it takes for you to pay back the total amount that you owe the lending firm.
What You Need To Consider When Getting A Car Loan
Most car loans are now offered directly by car dealerships themselves, although these types of car loans may have certain provisos and limitations as to what type of vehicle you can purchase with your loan. This will largely depend on your overall income, the type of job you have, your credit history, or all of the above. You may likewise opt to avail of a car loan through banks, lending companies, or online lenders. The terms and conditions of your repayment will vary depending on the lending company you choose to do business with.
In most cases however, car loans are simple interest loans. This means that it is a very straightforward loan which demands that you pay only for two things:
The principal amount – which the money that the lending firm hands out to you in order for you to purchase the vehicle of your choice, and
The interest – which is additional money that the lending firm adds on top of the principal amount, for the amount of time they will have to wait until you’ve paid the principal amount fully.
Car loans are a great way to obtain a vehicle quickly, even if you don’t have a large amount of cash to make a purchase outright. You should still be careful when it comes to choosing the lending company you do business with, however, since not all companies charge the same interest rates, nor do they offer the duration for your repayment.