A Beginner’s Guide to Understanding Auto Loan Length
Your credit score, financial circumstances, and goals for the future will influence the type of auto loan you choose. They’re available in 12-month increments, so you will decide how many years is a reasonable amount to pay off the vehicle.
As a beginner car owner, you should understand auto loan lengths to determine which one you will choose. Continue reading to learn more about your options.
36-Month Auto Loan: Quick and Cost-Effective
A 36-month auto loan is a short-term loan with a repayment period of three years. This option is great for people with the financial means to make large monthly payments in order to pay off their vehicles quickly. The shorter loan length results in less interest accrued over the life of the loan and allows you to build equity quickly.
48-Month Auto Loan: Finding Balance in Moderation
With a four-year auto loan you pay off your loan reasonably quickly. Fortunately, the monthly payments are more manageable compared to a 36-month loan. This is a good option for people who want to own their vehicle without stretching their budget too thin.
66-Month Auto Loan: Common for Its Flexibility
It’s crucial to have a balance when choosing an automotive loan. A 66-month, or five and a half-year loan, is favorable because of its reasonable duration and monthly payments. The loan gives borrowers the flexibility to adjust their budgets and allocate funds to other financial commitments.
However, it is important to consider that this longer repayment period comes with a slightly higher interest cost. While the monthly payments may be lower, borrowers will end up paying more in interest over time.
75-Month Auto Loan: The Most Affordable Choice
Many people cannot financially support extremely high monthly payments and short auto loans. That’s why the 75-month auto loan is one of the most popular options for borrowers. They can easily fit the monthly payment and interest into their budget without suffering financial loss.
Just remember that interest rates will cause borrowers to pay more in the long run. This extended loan duration allows more time for interest to accumulate, resulting in a higher cost. Nevertheless, the higher interest rate is doable to preserve financial well-being and reduce stress for the time being.
84-Month Auto-Loans: Stretching Time for Lower Payments
The longest loan you can choose spans seven years. This option can be particularly beneficial for people purchasing an expensive vehicle or those with a tight monthly budget. By extending the loan over a seven-year period, borrowers can enjoy reduced monthly payments.
The short-term affordability will come with a price of considerable interest. Weigh each option’s long-term effects to select the right option for your finances.
Beginners need guidance to understand the different auto loan lengths. While interest rates are driving factors in your decision, credit union auto loans offer some of the lowest rates in the business. Contact GFA Federal Credit Union and speak to a member of our Better Banking team to find out which auto loan length best suits your budget and lifestyle.