Auto loan term is the amount of time during which a borrower has to pay off the debt. A borrower makes regular payments (usually monthly) until he pays off the whole debt. Common auto loan term is 60 months (5 years). It means that the lender will receive regular payments every month for 60 months.
There are still short-term and long-term loans.
- Short-term auto loan terms make up 48 months (4 years). Some borrowers face 36-months period (3 years). Before applying for a certain loan, it’s crucial to search for the auto loans best terms because different companies attract clients with various benefits including affordable terms. In the case of a short-term loan, the borrower faces larger payments but lower interest.
- Long-term auto loan periods last for 72 months (6 years) and 84 months (7 years). It means that a lender offers smaller payments but higher interest. The main disadvantage of such loans is that you pay more than the vehicle worth. It’s called “upside down effect”.
Financing terms for auto loans differ depending on the condition of the car – new or used. A person, who purchases a new car, can face 60 months loan term but a person, who purchases the same car but used, will face 36 months loan term.