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Choosing Between Shorter and Longer Tenure Car Loans
Posted on Wednesday, May 26th, 2021 | By IndusInd Bank
In an ideal world we would surely like to pay off all our moneys in full and straight up. However, a vast majority of the population globally need to finance their vehicle purchase with the assistance of a bank. Vehicle loans have been designed to help you fulfill your dream of buying your dream car. They are designed specifically to cater to your financial needs. In a world where a sweeping number of people are taking loans, it is important to understand whether one should choose a short or a long tenure for car loans.
What Are The Advantages & Disadvantages of a Short Term Loan?
Unlike a long term car loan, you will pay a lesser rate of interest and also be paying off your debt quicker, which gives a sense of relief and pride to a lot of people. Something that a lot of people overlook while considering a car loan is the depreciation value of the car. In the long run you do not want to end up paying more for your car than its actual worth at the time. The short term loans save you from this situation and in most cases ensure that your car has a higher resale value.
On the downside, in a short term car loan you generally have to pay either a large down payment or large monthly payments towards your EMI.
What Are The Advantages & Disadvantages of a Long Term Loan?
When it comes to choosing a long term repayment option for your vehicle you may be able to indulge yourself and your family and buy a more expensive car. In most long term car loans, you will be able to opt for lower monthly payment options.
On the other side of this lucrative coin you will be making payments for your car for a long time and its resale value will be lesser when your final penny is paid off. In such a car loan not only will you be paying your loan back for a long time but will also be subject to a high rate of interest.
The Final Take
When you apply for a car loan, you have to take into consideration various factors and make a decision. Prima facie it is the short term car loans that most consumers opt for as you pay less interest, your debt is cleared quickly and the resale value of your car remains high. However, one must always cut their coat according to their cloth.
Once you have made a decision to apply for a car loan and buy your dream car, you will have to sit down and make a list of the pros and cons of short and long tenure car loans. The decision in the end is yours to make, but a well informed financial decision is sure to help you in the long run.
Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.
