When you buy a car, the last thing you want to worry about is the loan term. It’s easy to make it all about the loan amount, but it’s really important to think about the term, too.
The term of your car loan affects your monthly repayments and the overall cost of the loan. It can also affect your car ownership in a number of ways.
If you go for a longer loan term, you’ll pay more interest over the course of the loan, but that’s a good thing. Because of the lower used cars in sacramento interest rates that are available now, it’s generally a good idea to borrow for a longer term.
If you need to borrow a larger amount of money, you may find a longer loan term makes sense, but if you’re not sure about your borrowing capacity, a shorter loan term may be a better option.
Understanding Your Loan Term Options
There are three main types of loan terms that are available to you when you buy a car:
There are a few things to think about when you’re looking at the different loan terms, and this can help you decide which one is right for you.
A 30-year term is the longest loan term you can take out. That means you’ll have to make monthly repayments for the life of the loan, which will include interest.
A 25-year term is the next longest term. It means that you’ll only have to make repayments for 25 years, which is half the time of the 30-year term.
A 20-year term is the shortest term that you can borrow. You can make monthly repayments for just 20 years, so you�re unlikely to end up with a loan that’s as expensive as the 30-year term.
You can get a car loan for any term you want, but there are some things to consider when you’re thinking about the term.
How Long Is Long Enough?
If you’re looking for a longer loan term, you may think that a 30-year term is the best option for you. After all, used cars in sacramento that’s a lot of time to pay off a loan, right?
The problem with thinking like this is that it doesn’t take into account the interest that you’ll have to pay.
If you borrow $40,000 for a 30-year term, that means you’ll be making repayments for the whole of the loan term. If you’re paying 3% interest per year, you’ll have to pay a total of $14,400 in interest.
On the other hand, a 20-year term would mean that you’ll only be paying $6,000 in interest. But that doesn’t mean you’ll only have to make repayments for 20 years.