9 year car loan is it good for car buyers
by EARNEST YOUNGE
9 Year Car Loan: Is it good for Your Credit
Blizzard! As the cold freeze passes over the auto and home mortgage industry companies are trying to figure out what is the most expedient financial approach to stay afloat and to keep the cash register ringing �C caching!
Many car manufactures and auto dealerships have created zero down payment car loans, no credit bad credit loans or no interest payments financing. VW, however, is in the process of introducing something unorthodox. The company is in the process of introducing a 9 year car loan financing program. I know, I know! Nine years! 108 months! If you were to buy a car with a nine year loan you will be through paying them by 2017.
The average auto loan is now 64 months, once was 36 months. Recent research has indicated that about 45 percent of new car buyers are opting for a car loan that is longer than six years. The question you should ask yourself before choosing this option is whether that would be good for your credit and how much more do you have to pay verses a 36 months or 64 months car loan.
First, you need to keep in mind that a car loses 15 percent to 20 percent of its value within the first year. The longer the term of the loan, the higher the interest rate; for instance, a 5 year car loan may be at 5 percent while a 7 year car loan will have an interest rate of about 8 percent. In addition, the interest rate will vary depending on if you are purchasing a new or used car. Bankrate.com interest rate for 36 months loan for a new car is 6.86 percent while a used car was 7.37 percent.
However, if you are on a low budget or if you have bad or little credit a nine year car loan could be a favorable option, since payments will be relatively low and manageable. Moreover, with interest rates at historic lows, gyrating around 7 percent in contrast to 18 percent in the 1980s, it would be prudent to take advantage of the situation.
A 5 year $15,000 car loan at 7 percent will cost you $255 each month with a total payment of $18,361 at the end of the loan. A 9 year car loan for the same amount would have an interest rate of about 8 percent with a low monthly payment of $195.28 and a total payment of $21,090.24 at the end of the loan.
Before going to the car dealer check your credit report. You can obtain a free credit report by visiting AnnualCreditReport.com. Log onto FICO and check your credit score. FICO has recently made changes to the way it calculate credit scores that could be to your advantage. By the new rules, FICO will no longer penalize individuals for mistakes made by companies who report inaccuracies in your payments. Checking your credit score and resolving any discrepancies in your credit report before shopping around for a car could dramatically improve your credit score and reduce your interest rate on a car loan.
Also keep in mind that interest rates are not the only item that could increase your monthly payments. Look at the fine prints: terms of the loan, special fees and charges, and offers for extended warranty and loan insurance.
