What’s the longest car loan term to aim for?



When you finance a vehicle, it’s a good idea to choose a loan term that you can comfortably pay off each month, but also that doesn’t last too long. This is a balance between how much you want to pay in interest charges and how much in an auto payment you can handle.

What is too long for a car loan?

As a general rule, borrowers are recommended to choose a loan term of 60 months or less, especially if your interest rate is above average.

The key to choosing a loan term is understanding how much you will be paying over time and where you stand as a borrower. If you have poor credit, you will likely pay more when you finance because of a higher interest rate. Keep your interest costs in mind when choosing a loan term because they can add up quickly.

For example: Suppose you want to finance a used vehicle for $ 20,000 with an interest rate of 13% (the average interest rate for bad credit borrowers in our dealer network).

Using that information, here are the estimated interest charges you pay based on the term of your loan:

  • 48 months: $ 5,754
  • 60 months: $ 7,304
  • 72 months: $ 8,907
  • 84 months: $ 10,562

You may be wondering “What about the monthly payment?” And that’s a serious concern. Monthly payments estimated by loan term using the example above are:

  • 48 months: $ 536.55
  • 60 months: $ 455.06
  • 72 months: $ 401.48
  • 84 months: $ 363.84

Now you can see how well choosing a loan term balances month-to-month affordability and long-term cost. Choosing an 84 month loan term certainly cuts your monthly payments, but it also means paying well over $ 10,000 in interest charges and ending up paying over $ 30,000 for a $ 20,000 vehicle.

The cost of financing a vehicle

Most borrowers do not borrow money from an auto lender for free. Lenders charge interest, and borrowers with the lowest credit scores are generally charged more.

If you have good credit, for example, you might qualify for 0% interest for 84 months, which means choosing the longest loan term available can be very beneficial to you. A low monthly payment and no interest? Good deal !

However, borrowers with a credit score of less than 700 are unlikely to qualify for such incentives, and it is a good idea to plan and account for interest charges. You never really know what your interest rate will be until you apply for a car loan, but with a bad credit rating, you may need to budget for a double-digit interest rate.

A good way to reduce your interest costs is to choose an inexpensive vehicle, save money, and choose a shorter loan term. Having a large down payment can also increase your chances of qualifying for a car loan if your credit score is less than stellar. This shows that you have skin in the game and reduces the amount you need to fund.

Start buying a car today

Here has Auto Express CreditWe know that sometimes the hardest part of getting a car loan is finding the right lender. Not all auto lenders can help borrowers with less than perfect credit, but we have a relationship.

Fill out our free auto loan application form and we’ll search for a special finance dealership in your area. Dealerships in our network are registered with bad credit auto lenders who know borrowers are more than a credit score – so get started today!


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