Types of Automobile Financing
Automobile financing can be confusing. There are so many different options out there, so many ways that you can go, that it’s not always easy to know what would be the best one for you. On top of that, you have to know what kind of financing you will have available to you and even how your future situation might be effected by having those car payments. With some planning and some knowledge, though, you should be able to make the right choice.
The first type of automobile financing option is a long term loan. These are generally scheduled anywhere from five years (60 months) to seven years (84 months), which means that your monthly payments are often much lower than they would be with other types of loans. The major drawback to this sort of loan, though, is that you ultimately end up paying more since you have the loan for longer and interest has a longer period in which to accrue. Another problem with it is that you need to have better credit in order to qualify for a long term loan. However, with those few exceptions, a long term loan gives you more flexibility for changing life circumstances, such as suddenly losing a job and being unable to make higher payments.
A slightly different type of automobile financing is the short term auto loan. Short term loans are generally done in time spans of three years (36 months) to five years (60 months). Yes, there is an overlap there with the long term loan, but that’s because the interest rate on a short term loan is likely to be a little higher, though not so high that it offsets the extra time. Another difference is that a short term loan usually has higher monthly payments, but is more easily granted to somebody who has bad credit but, for example, is looking for used cars Charlotte NC.
A special type of short term loan is called a Buy Here Pay Here loan. Rather than going through a bank, the dealership itself will offer the car loan to you and you would pay them directly in installments, just like you would otherwise. The difference is that you generally have to pay at the location, though more and more dealerships are integrating options that allow you to pay online or over the phone. Buy Here Pay Here loans are a great way for people with little or no credit to be able to get into a quality vehicle.
If you’re smart and know what you can reasonably expect, you can get a loan that works for you and helps you own the car you want. It’s not an easy process, but ultimately you’ll be happy if you know what to do with your automobile financing.