An 84-month loan can be a good idea if you can afford it. Longer loans mean more interest charges and therefore more money paid for your car in the long run, but they also mean a smaller monthly payment. Let's look at how to know what's right for you.
Getting an 84-Month Loan
Eighty-four months equals a seven-year loan term, which is a long time to be paying for a vehicle. However, if you need to lower your monthly payment, a simple way to do so is to opt for a longer loan. Typically, our advice is to take on the shortest loan term possible with the highest payment amount you can comfortably afford each month. This allows you to balance your monthly cost and overall cost.
The longer you have a loan, the more interest accrues. Interest is the price of borrowing money, and it can be different for each consumer. Typically, the lower your credit score, the higher the interest rate you may be given. Additionally, the longer the loan term, the higher the interest rate, too. This means that an 84-month loan might not be the best idea if you're struggling with poor credit.
Long Loans and Poor Credit
Long loan terms can sound like a good idea, but they have some drawbacks as well.
An 84-month loan leaves you in danger of negative equity, and of being stuck in it well beyond the vehicle you took out the original loan on. See, cars lose value over time due to depreciation, and new cars with long loans may be hit the hardest.
This means as soon as it drives off the lot, new cars begin to lose value. Therefore, you're instantly in negative equity – but how much depends on what you owe. The longer the loan, the longer you're in that position. Having equity means your vehicle is worth more than you owe. With an 84-month loan, you likely owe more than your car is worth for a number of years.
If you decide to trade in the car before you're in an equity position you may be able to roll your negative equity into your next loan. However, this starts out this loan in an even bigger negative equity position, and if you take out a long loan to get your payments small enough to afford you're just getting stuck in a cycle of growing debt.
Plus, when you pay on a car loan for seven years or longer, you run the risk of paying for expensive repairs while you're still paying off the car. All these factors can be a red flag for borrowers with bad credit.
Ready to Find a Loan?
When it comes to how long of a loan to get, an 84-month loan may be tempting, but only you can decide if it's right for you. When you're ready to get your next loan, it can be hard to know just where to turn, especially if you have poor credit.
Instead of searching all over town for a dealership that can work with bad credit borrowers, why not start here instead? The Car Connection has a nationwide network of special finance dealers that are signed up with subprime lenders. To get matched to one in your area simply fill out our fast, free auto loan request form. We'll get right to work for you.