Does a 72-Month Car Loan Make Sense?

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Even with poor credit.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - December 30, 2019

A 72-month car loan can make sense in some cases, but it typically only applies if you have good credit. When you have bad credit, a 72-month auto loan can sound appealing due to the lower monthly payment, but, in reality, you’re probably going to pay more than you bargained for.

Loan Terms Impact Auto Loans

When it comes to loan terms, for a given amount, the longer the loan, the lower the monthly payment. However, interest is charged on virtually all loans – expressed as an annual percentage rate (APR) – which is the cost to borrow money. Due to the way interest is charged, the longer your loan term is, the more expensive the loan becomes.

Let’s look at an example:

If you’re financing a $10,000 vehicle at an interest rate of 11% for 48 months, you pay a total of $12,406, with a monthly payment of approximately $258. If you finance that same loan for 72 months, your monthly payment drops to approximately $190, but the total cost to finance increases to $13,705.

With that in mind, you may wonder how to get a car for the lowest possible price. The overall cost of financing comes down to your interest rate. If you want to save money, you need the best interest rate you can find, which isn’t always easy with bad credit.

Finding the Best Interest Rates

Rate shopping is usually recommended in order to find the lender offering the lowest interest rate when you need auto financing. To do this, you apply with multiple lenders within a small time frame – usually 14 days.

In theory, this is a practical way to approach lending. Rate shopping cuts down the effect of having multiple lenders pull your credit in order to approve you for a car loan. When you stay within a rate-shopping window, credit bureaus look at all the hard inquiries made for the same type of credit as one, minimizing the impact to your credit score.

However, as a bad credit borrower, rate shopping is difficult because you’re automatically facing higher interest rates due to your credit situation. On average, someone with a poor credit score (below 600) can typically expect an interest rate between 9% and 21%, depending on the lender and the borrower’s individual situation.

Improve Your Chances for a Better APR

There are several things you can do to improve your chances for a lower APR. Some of these steps take time, like improving your credit score, but every bit helps. In the end, it all comes down to what a lender is willing to offer you.

Try these four tips to improve your chances of a lower interest rate:

  1. Know your credit situation – Have you ever heard the phrase “knowing is half the battle”? It’s true. When you know your credit score and what’s on your credit reports, you keep the ball in your court. After you find out your credit score, you should also research what the average interest rates are for people in similar credit situations, so you know when to negotiate, and when to walk away. This way, if a lender offers you an outrageous interest rate, you know that you have a leg to stand on.
  2. Consider a cosigner – Adding a cosigner with good credit to your loan may be enough to give a lender the push they need to get you a better rate. Make sure the person you ask to cosign for you knows what’s at stake if they take on this role.
  3. Make a larger down payment – Increasing the amount of money you’re willing to put down means that you don’t have to borrow as much. A smaller loan may convince a lender to drop your APR.
  4. Get a shorter loan term – Remember how a 72-month loan usually isn’t a good idea? Some lenders might agree. In some cases, a lender may lower the APR if you’re willing to pay it off sooner. This situation is a good win-win for both you and the lender. The lower interest rate helps you save money, and the shorter loan term means you pay off the loan sooner, which lowers the loan risk. Lenders prefer loans with lower risks.

If you aren’t able to get the low APR you’re looking for right now, don’t fret. Getting a bad credit auto loan can be the first step to improving your credit score, so you won’t have to think about a 72-month loan or settle for a high interest rate the next time around.

Get the Most Out of Your Car Loan

If you’re looking for the best loan situation you can find for your credit, one thing’s for sure: you have to work with the right lender. Not all lenders work with people that are struggling with poor credit, and the lenders that can aren’t always easy to spot. But CarsDirect can help.

We work with a nationwide network of special finance dealerships that have the right lenders for many types of credit situations. Don’t waste time and money looking everywhere for a lender that has the offer you need. Instead, fill out our fast and free car loan request form and get connected with a dealer in your area.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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