The Pros and Cons of Short-term Car Loans
It is rare for anyone to buy a new car outright – after all, how many of us have that much money lying around?
For most people, you’ll buy your new car through a plan or car loan.
If you’ve decided that you want a car loan for your future car, you have a few options.
The length of your car loan, as well as its other terms and conditions, will be important factors in your decision-making process.
A short-term loan – let’s say a 36-Month car loan – has many benefits and might be ideal for you depending on your situation and goals.
In the following article written by Metro Car Removal Sydney, we will take a look at the Pros and Cons of short-term car loans.
The Pros of a Short-Term Car Loan (36 Months)
There are some great advantages of choosing a short-term car loan rather than a long-term loan.
The most notable Pros include:
- Lower Interest Rates: As a rule of thumb, the shorter the car loan, the lower (and better) the interest rates are. There are many reasons for this, including being a lower risk of default and because the lender sees the overall return sooner than with a long-term loan. As a result, you will pay less overall than when choosing a long-term car loan.
- You Can Pay Off Your Car Loan Faster: Choosing a Short-Term Car Loan gives you the pleasure of paying it off much sooner. You get to sigh in relief knowing that you don’t owe any more money to the lender after a much shorter time.
- You Pay Less Overall for Your Car: Thanks to lower interest rates, what you pay in the long run won’t run be more than what your car is worth. After all, long-term plus high-interest rates could see you paying more than what your car’s market value actually is.
- There Is Less Risk of Financial Trouble: Due to the shorter period of time that you will be paying for your car loan, there is less chance of you coming into financial issues such as losing your job or unexpected expenses.
Cars depreciate fast – even those in perfect condition. Things like Gap Insurance can help but won’t cover everything, so make sure you do your research about what works best for you.
Short-Term Loans Allow You to Save Money and Plan for the Future
By paying off your Short-Term Car Loan quickly, it allows you to consider other loans in the future sooner. This would be more difficult if you are still in the middle paying off a long-term loan. On top off this, it is common practice for the money you save from a short-term loan to be put aside for other future purchases.
Car Insurance Options are Freed Up
The sooner you complete payments for a car loan, the sooner you have more options for car insurance. For example, you would not be required to have comprehensive or collision coverage. Of course, this isn’t a recommendation but is just one example of how you how more options once your payments are wrapped up.
The Cons of a Short-Term Car Loan (36 Months)
As good as the benefits are of having a Short-term car loan, there are also some Cons depending on the type of plan you’d prefer.
The following are some of the Cons of a Short-Term Car Loan of 36 Months
- Short-term Car Loans Mean High Monthly Payments: Although interest rates are lower, a short-term car loan will mean high monthly payments. It is important to be sure that you can fit such a plan into your budget and that your likelihood of coming under financial strain is very low. Being unable to provide the payments on time will mean the vehicle being repossessed.
- There Will Be Less Money to Spend for Other Expenses: A Short-term Car Loan will by nature be more intensive than a long-term car loan, and so in order to fit it into your budget you may have less money to spend on down-time and other luxuries.
Other Car Loan Options
There are different term lengths for car loans and outside of the 36-Month short-term car, some of these include the 48-Month Car Loan, the 60-Month Car Loan and Car Loans longer than 60-Months. Occasionally lenders offer the same interest rates for 48-Month Car Loans as 36-Month Car Loans. Any longer than 60-Month Loans might suggest you can’t afford the vehicle and will still cause you to end up paying much more overall – and potentially more than the vehicle is worth.
When the time comes to sell your car, one of the fastest, easiest and most hassle-free way to do it is by selling your car to a Car Removal Sydney company. You’ll get your car sold in a day and receive on the spot cash payment for the sale.