There are a number of types of used car financing. When you’re looking for a car that you can call your own at a great price, this is generally the way to go. Even used cars in Charlotte NC can be too expensive to pay for out of pocket, so you often have to find a way to get a car loan, and that can be difficult to navigate. Essentially, there are two types of financing that you should pay attention for, and pros & cons to both.
Perhaps the most common type of used car financing is a long term loan. Long term loans are usually anywhere from five years (60 months) to seven years (84 months). They’re usually thought of in terms of months since that’s how many equal payments you’ll have to make before you own the car flat out. Perhaps the biggest benefit of this is that since it’s spread out so much, you’re paying smaller amounts monthly, which can be especially helpful if you encounter some problems you didn’t anticipate. The drawback is that since the loan is spread out over so long, you end up paying more in interest than you would otherwise have had to pay with a short term loan. These also generally require better credit.
A short term loan is your other major option for used car financing. These are generally anywhere from three years (36 months) to five years (60 months). Yes, there is a bit of overlap there, and the difference is generally in the interest rate. Short term loans often have higher interest rates, though not enough to offset the longer term of a seven year loan. They’re generally easier to get if you have bad or no credit, and you end up indebted to a bank for a shorter time period. Unfortunately, it generally means higher monthly payments, which can be a big problem for a lot of people.
There is a specific type of short term loan called a Buy Here, Pay Here loan. These are usually not done through banks, but rather offered by the dealership itself and you will physically return there to pay off your portion of the loan every month. This is how a lot of dealerships are helping people get into cars that they otherwise might not have been able to with the stringent loan requirements that banks impose on their borrowers. If you opt for this type of loan, make sure that you understand all of the details.
It’s slowly becoming easier for people to be able to purchase cars again. It was a long slog, and it isn’t over yet, but people have really been able to move forward thanks to the varied options in used car financing. Many buy here pay here dealers can also provide you financing on the lot. Read this article to learn more about on the lot financing.