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Shorter Car Loans in Lincoln - Pros and Cons

Shorter Car Loans in Lincoln - Pros and Cons

The trend for auto loans seems to be for longer terms. You can afford to borrow more and keep monthly payments sensible. That isn’t the only way to borrow though and there are also benefits to shorter car loans.


We asked our Lincoln auto loans team to come up with some pros and cons of shorter car loans. This is what they came up with.


Shorter Car Loans in Lincoln


Average auto loan terms are around 60-72 months. Shorter auto loans are typically around 36 months. Any shorter and the interest rate tends to get a little high. We would say this is the practical minimum for a loan.


The pros of a shorter auto loan


There are a few benefits to a shorter auto loan.


Lower interest rates – Some shorter auto loans come with lower rates. This is because the default rate is lower so the risk is lower. Even though your monthly payment will be higher, the time which you have to pay it is shorter, which presents less of a risk to lenders.


Paid off faster – Rather than paying for the loan over 5-6 years, you’ll be all paid off in 3. You can then use the money you free up for savings or something else now the car is paid off.


Still a new car - The car will still be fresh and new even though it’s all paid for. You shouldn’t feel left behind driving an older car and there should still be plenty of life left in the car for you to enjoy while you’re free and clear.


Pay less interest – As well as a lower rate, you’re also servicing a loan for less time. This results in paying less overall for the loan. As interest is paid monthly, the fewer months you have the loan, the fewer interest payments you’ll make.


The cons of a shorter auto loan


It isn’t all good news though as there are downsides to shorter auto loans.


Higher monthly payments – The biggest downside to a shorter auto loan is a higher monthly payment. You need to pay the principal off over fewer months which will result in higher payments.


Could leave you short for emergencies – Depending on your financial situation, a higher monthly payment could leave things tight for other things. Unless you have savings, coping with unexpected expenses, emergencies or illness may cause difficulties.


Not all auto loans will charge less interest – Only some lenders will lower the rate for shorter loans. You’ll have to shop around like you usually would to find a good deal.


As you can see, if you can comfortably afford higher payments, a shorter Lincoln auto loan makes perfect sense. You’re paid off faster, pay less interest and can go about your life free and clear.


It won’t work for everyone though!


When you’re ready for a car lease or loan, get in touch with the Lincoln auto loan experts at Northway Ford for great deals on auto finance.


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