Car financing is a complicated and confusing subject for a lot of people. The more you talk to banks and dealerships, the more convinced you are that what should be an easy calculation is actually some higher form of math you never encountered in high school. It’s even tempting to believe that it’s purposefully obtuse to make it easier to take advantage of potential borrowers. However, the truth is that financing can be very simple if you just know the three types of financing available for used cars Charlotte NC.
The first and most common are short term loans. When it comes to car financing, there are the standard. They are generally for people with poor to middling credit who are looking to rebuild. Essentially, they tend to have a higher interest rate than a lot of other options and will involve a higher monthly payment, but they also have a lower total payment overall because of the shorter term. Basically, there is less time for interest to build up, so you ultimately end up paying much less. Most often these sorts of loans will last between 36 months and 60 months, depending on the specific details and how the interest rates are decided.
A little less common is the long term loan. Long term loans are usually anywhere from 60 months to 84 months (five years to seven years) in length, so as a result they have a lower monthly payment, which can be fantastic if something terrible happens and you suddenly find yourself, for example, out of a job or not able to make a lot of payments in a month. These generally have smaller interest rates as well, which can be really beneficial since you’re keeping the loan out longer. You will end up paying a little more overall, but that may be worth the immediate benefits afforded by a longer loan.
A relatively new form of car financing is the Buy Here Pay Here model. This style of financing rose in popularity during the financial crisis when a lot of people were having trouble getting loans from more traditional lenders like banks. Car dealerships, unable to sell to anyone but the most sound investments, decided to cut out the middle man and offer loans directly to their customers. These loans could be paid at the dealership every month through a variety of methods and generally are given to people with lower credit scores. The big advantage, other than ease of payment, is that you generally have more access to your loan officer than you would at a bank.
There are some variations, but for the most part, those are your basic types of loan. Once you find the one that works for you, then you should have no trouble with car financing.