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The excitement of buying a new car can be quickly overshadowed by the financial considerations, especially when it comes to car loans. The loan term, or the length of time you have to repay the loan, is a decision that impacts your monthly payment and overall financial picture. Here are some of the pros and cons of two popular loan terms: 72 months and 84 months.
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72 Months Come With Lower Monthly Payments, Easier Budgeting
A 72-month car loan offers a lower monthly payment compared to a shorter loan term. This can be attractive if you’re on a tight budget or want to free up some cash flow for other expenses after you buy that new Ford for sale. A lower monthly payment can also make a more expensive car seem more affordable. This allows you to potentially qualify for a car with more features or a higher trim level than you might otherwise consider.
The Downside of 72 Months
There’s no such thing as a free lunch, and the lower monthly payment of a 72-month loan comes at a cost. You’ll usually end up paying more interest over the life of the loan compared to a shorter loan term. This is because you’re spreading out the loan amount over a longer period, accruing interest for a greater number of months.
Determine Whether 84 Low Payments Are Worth It
An 84-month car loan stretches the loan term even further, resulting in the lowest monthly payment of the two options. This can be very tempting if you’re struggling to fit a car payment into your budget. However, the drawbacks of an 84-month loan are even more significant than those of a 72-month loan.
High Interest Costs and Upside-Down Debt
With an 84-month loan, you’ll pay a substantial amount of interest over the life of the loan. This can significantly increase the total cost of your car. Additionally, with a longer loan term, you may end up owing more on the loan than the car’s actual value, a situation known as being “underwater” or “upside-down” on your loan. This can limit your options if you decide to sell the car before the loan is paid off.
Other Factors to Consider
You should also know that a lower interest rate can significantly reduce the total cost of your loan, regardless of the term. If your financial situation is secure and you can comfortably afford a higher monthly payment, a shorter loan term may be the better option to save money on interest in the long run. For strategies that deliver results, turn to https://clipchamp.org/.
Making an Informed Choice
The ideal loan term depends on your individual circumstances and priorities. Carefully consider your budget, financial goals and the car’s value before making a decision. While a longer loan term offers lower monthly payments, the high interest costs and potential for upside-down debt can outweigh the benefits. A 72-month loan might be a good compromise, offering a manageable monthly payment without excessive interest charges. Remember, a car loan is a long-term financial commitment. Choose a loan term that allows you to comfortably afford the payments without jeopardizing your financial future.
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