Related Info

• Budgeting and Saving
• Consumer Help and Tips
• Credit Report and Credit Score
• Dealing with Debt
• Family and Money
• Managing credit card debt
• Smart Shopping Tips
• Credit Counseling and Debt Counseling
• Housing Counseling
• Other Articles
• Helpful Links

Long Car Loans: Lower Monthly Payment, More Interest

One of the most important considerations when purchasing a new car is the terms of your new car loan. Most people want the lowest possible monthly payment, and this is often accomplished by taking out a loan with long terms. Did you know that choosing to take out a longer car loan will result in paying more interest over time? While a longer car loan may make a more attractive monthly payment, you will still be shelling out more money in the long run.

Your Car Loan Could Be Costing You More Money

If you're like most people, you're looking for ways to make your monthly bills more affordable. It's not beneficial to take out a longer car payment just to make your monthly payments smaller. Choosing a shorter car payment will make your monthly payments a bit higher, but will allow you to pay less money overall. Families who take out longer car loans end up paying thousands of extra dollars for a car.

Using an online loan calculator before you buy a car is a good idea so that you can see in black and white just how much you will be paying over time. The average person borrows $20,000 for an automobile. A three year loan at 7% would equal about $618 per month, a four year loan payment would be $480, five year loan $396 and a six year loan $341. There is a big difference in month payments, but would you rather pay four years of interest or six years of interest? The longer the term, the more interest you are paying to the bank.

You Could Find Yourself Under Water

Another negative to choosing a longer loan payment is the fact that you may not even keep your car for the whole loan period. Cars don't have an infinite shelf life – they wear out and repairs can become costly. Some cars completely break down after just a few years. If you need a new car before you are finished paying for it, you will be required to satisfy your old car loan debt at the time you purchase a new car. This may mean that you will be sucked into a never-ending cycle of car debt.

Before purchasing a new car, it's important to do your research. You need to make sure that you understand all of the terms of your car loan. If you have the financial capabilities to take out a shorter car loan, do so. You may end up paying a higher car payment each month, but you will be saving a lot more money on the total cost of your car.

Get Budgeting Help Debt Management Advice

If you're looking to find better ways to manage your money, contact Advantage CCS. Advantage CCS is a nonprofit credit counseling company that offers consumer credit assistance and debt management planning. You can take advantage of money saving tips, learn ways to minimize your debt, learn how to budget, and if you are struggling to pay your bills, the counselors at Advantage CCS can work with your lenders to help you repay your debt in smaller, more manageable payments. Work with a debt management counselor to find better ways to manage your own money so that you have more room in your budget.