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How long should your car loan be? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial decisions by offering interactive tools and financial calculators as well as publishing original and impartial content. We also allow you to conduct research and compare information for free and help you make informed financial decisions. Bankrate has agreements with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that are advertised on this website are provided by companies who pay us. This compensation could affect how and when products are featured on the site, such as such things as the sequence in which they be listed within the categories of listing, except where prohibited by law. Our mortgage, home equity, and other home lending products. However, this compensation will not influence the content we publish or the reviews that you read on this site. We do not include the vast array of companies or financial deals that may be available to you.



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4 min read Published 19 August 2022
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At Bankrate We take the accuracy of our content seriously. "Expert verified" means the fact that the Bankrate Financial Review Board thoroughly evaluated the article for accuracy and clarity. Its Review Board comprises a panel of financial experts whose objective is to make sure that our content is always objective and balanced. The reviews of the Review Board hold us accountable for publishing top-quality, reliable content.




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The edit was done by Rhys Subitch Edited by Auto loans editor

Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers gain confidence to take control of their finances through providing concise, well-researched and well-written information that is broken down into complex subjects into digestible pieces.







Reviewed by Mark Kantrowtziz Reviewed by Nationally recognized student financial aid expert

Mark Kantrowitz is an expert on student financial aid, the FAFSA as well as 529 plans, scholarships, education tax benefits and student loans.









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Choosing the length of the financing for your car is a key step when you are trying to choose the perfect auto loan. A longer loan term will lower the monthly payment however you'll pay more in interest over the duration of the loan. A shorter loan term means you will be paying less interest overall but your monthly installments will be higher. How do you determine the appropriate duration of the loan? When you are deciding on your car loan, consider your loan term with respect to the value of the car as well as your personal financial position. A longer loan term will lower the monthly cost, but it might not be the most suitable option when you are able to afford a higher loan payment or don't mind having a cheaper car. Bankrate's tip: It's crucial to think about your budget and -- both the transaction as well as the maintenance -- prior to purchasing an automobile. Get for an auto loan through your credit union or bank ahead of shopping for a car. To determine the best term length for your car loan Follow these steps: Establish your budget. This is your monthly budget and the amount you'd like to pay for the car itself. Be aware of how your finances will change, and take that into consideration. Be sure to qualify with at least three lenders. Shopping around can help you qualify for the lowest interest rate. The local credit union may allow you lower payments, particularly when you already have a relationship with them. Check the total amount of interest. Take your prequalification results and plug them into an to see the amount you'll have to pay per month, and the amount of interest you would be paying in total. Make a decision. Consider both the monthly payment as well as the total cost before deciding on which loan timeframe is most suitable to your needs. The long-term loan is more expensive than the short-term loans While a longer loan gives you the chance to purchase a higher-priced car, it will also mean more interest for a longer time. So even although the monthly installment will be less, the overall cost will be more costly. A shorter auto loan however, on the other side, has the lowest interest rate and a more expensive cost per month. In the event that your financial plan doesn't seem spot on, or there's a sudden shift to your earning capacity, you could be struggling to make those payments. There's no ideal loan length for each driver, therefore, you should consider the advantages and drawbacks of each prior to you sign off on your next car. Benefits and drawbacks of an extended-term automobile loan A is a good choice if your budget cannot cover a higher monthly payment. Since your monthly installment will be lower and it could allow you to pay for the cost of a more expensive vehicle. However, with a longer auto loan, you will pay more in interest over the course of. A longer-term loan also increases the risk of getting yourself into a loan or paying more than what the car is worth. This scenario can make trading in or selling the vehicle more difficult. Benefits and drawbacks of a short-term auto loan Where long-term auto loans can result in an excessive quantity of fees, a shorter-term loan implies less interest overall. Also, the car will be available even sooner. Additionally, cars are upgraded cars are selling at a rapid rate within the first five years, so it's highly unlikely that you'll be able to pay more than your car is worth over an extended period. If your budget is tight and you're not sure if you can afford a short-term loan is not a wise choice. This is particularly true if you don't have an enormous . To avoid this, stay away from expensive cars which could strain your budget. The reasons to think about a shorter loan period There are many reasons to sign off on the shorter loan. It will allow you to pay off your loan sooner, meaning you'll be able to take advantage of the vehicle you've bought, and you don't have a large loan due to. Take into consideration these aspects when deciding on the length the loan. Lower payments over time A longer loan period could mean payments for five to seven years. A shorter, between two and four-year loan will put you in complete possession of your car much sooner that means you'll be able to get the cash back into your monthly budget and can use it to pay down more expensive debts or save. You're less likely to be upside-down on your loan If you need to change or sell your car then you'll have more flexibility to make the change. It is likely that you won't have more than what your car's value, making it easy to sell it when you're ready to move on to another vehicle. Greater resale value having a less chance of being upside-down on your loan and paying off your car sooner means that it'll be worth more once you've finished the payment. So if your financial situation alters and you're forced to upgrade your car -or simply desire a change -- you'll obtain more value for your car as opposed to having to wait for five or 7 years. The bottom line It's important to be mindful of how much car you can actually afford. Beyond the total price of the loan, consider how much you can pay into your car every month, including fuel and insurance. A shorter loan might not be the best alternative for you to buy the vehicle of your dreams. However, if a comparable model is less expensive and can keep you from taking out a longer-term loan, it may be worth the compromise. Whether you opt for the shorter or longer term ensure that you obtain the best price possible. Learn more


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Written by

The article was created with the help of automation technology, and then verified and edited by an editor from our editorial team.



The edit was done by Rhys Subitch Edited by Auto loans editor

Rhys has been editing and writing for Bankrate since the end of 2021. They are committed to helping readers gain the confidence to control their finances with concise, well-researched and well-researched content that break down complex topics into manageable bites.






Auto loans editor


Review by Mark Kantrowtziz. Reviewed by Nationally acknowledged expert on student financial aid

Mark Kantrowitz is an expert on student financial aid, including the FAFSA and 529 plans, scholarships as well as tax benefits for education and student loans.






Nationally recognized student financial aid expert




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