For you, the perfect car loan duration in Eastern Canada depends on your financial situation and personal goals. But whatever you decide, be sure to shop around first and talk to experts (like the car financing specialists at Canada East Rides) to ensure that you get the possible best deal. As a rule of thumb, a car loan term of three to five years is usually considered a prudent choice. This lets you pay off your loan relatively quickly, while keeping your monthly payments manageable. For the lucky few who can afford more, shorter loan terms of two or three years are even better, paying less interest in the long run.
Shorter is Better for the Perfect Car Loan Duration in PEI
Generally speaking, the shorter the loan term, the less interest you’ll pay over your loan’s lifetime. However, your monthly payments will be higher. In contrast, longer loan terms mean lower monthly payments. but you’ll pay out more interest over the years. Ultimately, the perfect car loan duration for you is the option that slots comfortably into your budget, while helping you reach your financial goals. When deciding on the length of your car loan, the main factors to consider are your income, your monthly expenses, your savings, and your other financial obligations.
Let’s Look at the Actual Figures in Nova Scotia
Let’s assume the car you want costs $20,000 in PEI, and you’ve checked its price in the Kelley Blue Book. Depending on your credit score and monthly budget, you could fork out almost five times as much in interest on a longer-term loan. Here are three typical financing options for Nova Scotians, showing the financial consequences of loan durations and interest rates.
- Cost-effective Loan A lasts three years, with interest at 5%. So you’ll be making monthly payments of $599 for 36 Over your loan’s lifetime, you’ll pay $1,177 in interest charges.
- Fairly Affordable Loan B lasts five years, with interest at 6%. So you’ll be making monthly payments of $386 for 60 Over your loan’s lifetime, you’ll pay $3,200 in interest charges. This loan option has lower monthly payments than Loan A, but you’ll pay more in interest charges over time.
- Long but Costly Loan C lasts seven years, with interest at 7%. So you’ll be making monthly payments of $320 for 84 Over your loan’s lifetime, you’ll pay $5,442 in interest charges. This loan option has the lowest monthly payments of the three options, but you’ll end up paying the most as interest charges during these seven years.
Be Responsible about Your Perfect Car Loan Duration
You should always use your credit responsibly. by borrowing only what you can comfortably afford to repay. And you should avoid applying for credit you don’t really need – with one notable exception. That’s when an extra credit card would help keep your credit use low. Ideally, you should use no more than 30% of your available credit, making sure your debt-to-credit ratio stays within an acceptable range. This is also why you shouldn’t close your credit accounts, as a broad range of loan options is a plus factor for your credit score. Instead, keep your cards and other credit channels open and active, with regular payments. Monitor your monthly credit report regularly. It’s available free from Equifax, so you can easily ensure that it’s accurate and up-to-date. If you spot any discrepancies or errors, you can open a dispute with the credit bureau.
Pro Tip: If you’re trying to tweak your budget enough to upgrade your car, come talk to the auto financing experts at Canada East Rides. They’ll be happy to craft a solution that’s customized for your cashflow. Fill out this form and we’ll tailor an automobile financing plan for you in Nova Scotia.