Longer loan term is the current trend of the auto financing market. Many people are opting for lower payment amount and higher loan term programs. Used car buyers, like you, are lured towards this alternative because their budget is over-stretched. They already have several payments to make by utilizing their low-household income. And, longer loan term seems to be the only alternative.
But, you cannot be more wrong. When you opt for a used car loan with longer loan term, you end up paying more in interest. Let’s take an example for it.
Scenario - 1
Car Loan - $10,000
Interest Rate - 4%
Loan Term - 4 years
Monthly payment - $225.79
Total Interest - $837.95
Scenario - 2
Car Loan - $10,000
Interest Rate - 4%
Loan Term - 7 years
Monthly payment - $136.69
Total Interest - $1 481.80
So, if you want to save a considerable amount of interest, you must opt for shorter loan terms. There is one more reason for choosing a shorter term while buying a used car. Pre-owned automobiles have a shorter life in comparison to new cars. So, if you opt for a longer loan term, you will end up with an upside down car loan. You will owe more on the car than its worth. This situation can create a problem when you try to sell or trade the automobile. It will also be a problem in a situation when the car is destroyed in an accident.
Now, when you opt for shorter loan term, you have to manage slightly higher monthly payments. To tackle higher monthly payments, you have to reduce the loan amount. Here’s how you can do it:
- Make a smaller down payment by utilizing your savings or
- Trade-in your old car or
- You can choose a car with a lower value.
It is quite understandable that making higher payments can be an inconvenience but remember that a short-term inconvenience is better than a long-term loss.
Looking for an affordable used car loan? Fast Auto Loan Approval will help you in obtaining quick approval on used car loans. Higher flexibility, lower rates and easy car loan approval despite bad credit history are the many benefits of applying with the company. Apply now.
The One Tip for Used Car Buyers that will make the Auto Loan Simpler
![The One Tip for Used Car Buyers that will make the Auto Loan Simpler]()
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Published :
Rating : 4.5
