When you apply for an auto loan, you’ll have to set a term for the loan. That is how much time you have to repay your loan. Our Land Rover finance experts at Land Rover Northfield are outlining how your loan term affects your monthly payments.
What are Loan Terms?
An auto loan’s term is the length of your auto loan. It is generally measured in months. Most loans are 60 to 72 months, although loans can last anywhere from 36 to 84 months. In some circumstances, they can be even shorter or longer.
Getting a Shorter Term
There are many advantages to securing a loan with a short term. A short term is generally considered 48 months or less. You’re likely to get more loan offers with a shorter term and a better interest rate. Plus, you’ll pay off the vehicle sooner and pay less interest overall.
Getting a Longer Term
With a longer term, the vehicle’s cost is stretched out over a longer period. That gives you smaller and more manageable monthly payments. However, your loan’s interest is typically calculated on the remainder of your principal balance. Since you aren't paying your principal down as quickly, you’ll end up paying more interest and more overall.
Risks of a Longer Term
Since a longer loan term is riskier for lenders, they often give long-term loans a higher interest rate. This also adds to the cost of your loan. Also, since you’re making small monthly payments, it’s much more likely to become upside down in a long-term loan.
Apply for Land Rover Financing in Northfield, IL
We strive to provide a simple auto financing process. After reviewing your buying criteria, we can help you secure Land Rover financing in no time. Visit Land Rover Northfield to get started today!