84 Month Car Loans: The Solution To Car Buying On a Low Budget
84 Month Car Loans: The Solution To Car Buying On a Low Budget
Posted on July 17, 2023
When it comes to financing a car purchase, there are various options available, and one that has gained popularity in recent years is the 84-month car loan.
Designed to provide flexibility and affordability, these longer-term loans have attracted attention, particularly from individuals with low credit scores or tight budgets.
In this article, we will explore the ins and outs of 84-month car loans, discussing their advantages and disadvantages to help you make an informed decision.
Advantages of 84-Month Car Loans
Lower Monthly Payments: One of the primary benefits of an 84-month car loan is the extended repayment period. By spreading payments over a longer duration, borrowers can significantly reduce their monthly installment amounts.
This feature makes the loan more accessible to individuals with lower incomes or those on a tight budget.
Improved Affordability: By extending the loan term, the total amount financed is divided into more payments. As a result, the overall cost of the vehicle is spread out, making it more affordable for borrowers.
This enables them to purchase a higher-priced car that might have been out of reach with a shorter-term loan.
Cash Flow Management: Longer loan terms also help borrowers manage their cash flow more effectively. With lower monthly payments, individuals can allocate their finances towards other essential expenses or savings goals.
This can be particularly advantageous for those who rely on their vehicles for work or have other pressing financial commitments.
Opportunity for Credit Improvement: For individuals with a less-than-ideal credit score, securing a car loan can be challenging. However, 84-month car loans can serve as a viable option.
Lenders may be more willing to extend financing to individuals with low credit scores since the longer repayment period minimizes the monthly financial strain.
Making consistent, timely payments over the loan term can also contribute to improving one's credit score.
Disadvantages of 84-Month Car Loans
Increased Interest Costs: While lower monthly payments may seem attractive, it is important to consider the long-term financial implications.
With an extended loan term, borrowers end up paying more in interest over time.
The accumulation of interest charges can significantly increase the total cost of the vehicle, making it important to carefully evaluate whether the convenience of lower payments outweighs the overall expense.
Depreciation and Negative Equity: Cars tend to depreciate in value over time. With an 84-month loan, the repayment period often exceeds the vehicle's useful life, leading to a higher likelihood of negative equity.
Negative equity occurs when the car's value depreciates faster than the loan balance is paid off, leaving the borrower owing more than the car is worth.
This can create challenges if the borrower wants to sell or trade in the vehicle before the loan term ends.
Limited Flexibility: Choosing a longer loan term means committing to monthly payments for an extended period.
Life circumstances, such as job changes, relocation, or unexpected expenses, can arise during this time.
Having a long-term loan may limit the borrower's ability to adapt to these changes or explore other financial opportunities.
Higher Interest Rates: Compared to shorter-term loans, 84-month car loans may come with higher interest rates.
Lenders compensate for the extended repayment period and increased risk by charging a higher APR (Annual Percentage Rate).
This results in additional interest costs over the life of the loan, further impacting the overall affordability.
Is an 84-Month Car Loan Right for You?
84-month car loans offer a viable financing option for individuals with low credit scores or limited budgets. They provide lower monthly payments, increased affordability, and improved cash flow management.
However, it's essential to consider the downsides, such as higher interest costs, negative equity risks, limited flexibility, and potentially higher interest rates. Before deciding to opt for an 84-month car loan, borrowers should carefully weigh the advantages and disadvantages based on their unique financial situation and long-term goals.
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