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Wells Fargo Used Auto Loan Rates
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An 84-month auto loan with low monthly payments may seem like a good idea on paper. But those lower car payments come with a real financial cost: interest. And even if you’re paying more than a short-term loan, there are some situations where an 84-month car loan might make sense.
We at the Guides Auto Team looked at the pros and cons of these longer loan terms and whether or not the numbers could make for a sound financial decision. This guide will help you understand how these loans work and where you can find the best auto loan rates and the best auto refinance rates for 84-month terms.
Why Trust Our Team The Guides Auto Team is committed to providing you with reliable information to help you make the best possible financing decision for your vehicle. Our researchers, writers and editors are dedicated to vetting providers and analyzing customer feedback and insights, so you can choose with confidence.
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An 84-month auto loan gives you seven years to pay off the lender. Although shorter terms are more ideal, the most common term in the American car market is 72 months, according to Edmunds.
As car prices rise, 84-month car loans are becoming more and more popular. Spreading your car payments over a longer period of time can lower your monthly obligation – often significantly. The downside is that with lower monthly payments comes more time for interest to accrue, among other potential risks.
Signing up for an 84-month auto loan has serious drawbacks. There are a few things to consider before making the decision.
The most obvious downside to an 84-month auto loan is that you’ll pay more interest over the life of the loan. Longer loan terms typically have the highest interest rates, but they can also increase the total interest you pay in other ways.
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Because you pay less each month, you would also pay less on your principal—the original amount you borrowed. As a result, you pay more interest for a longer period of time until your loan starts.
The table below shows how different loan terms affect the total amount of interest paid on a $25,000 loan at 5.2% interest.
Owing more money on your car than it’s worth is called a reverse car loan. This negative equity position, also known as underwater, is a financially dangerous place to be. This puts you at risk of making loan payments on a car you don’t own if it’s totaled.
How much time you spend on the upside depends on how much you put down on the car, the length of the loan, and how quickly your car wears out. Taking out an 84-month auto loan can leave you under water for years.
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After you pay off your car loan, the remaining equity in your car is considered a financial asset. However, the older your car is and the more miles it has, the more wear and tear it will have.
With an 84-month loan, you’ll pay for your car over seven years. Even if you buy a new car, your car will be more than seven years old by the time you pay off. While it still has some value, it will be significantly less than when the car was newer.
Despite the disadvantages, the 84-month car loan has its advantages. Depending on your situation, a longer loan term may work in your favor.
The main advantage of an 84-month loan is that you will have a lower monthly payment. Even if you can afford to pay more now, your financial situation can change overnight. Having a lower monthly payment can protect you from the risk of defaulting on your loan and losing your car.
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Sometimes an 84-month auto loan is a necessity. It’s helpful to remember that you can refinance your auto loan in the future.
When you refinance your auto loan, you get a new loan to pay off your existing loan. If you can manage larger payments in the future, you can get a refinance loan for a shorter term. You can even do it at a lower interest rate.
84-month auto loans are more common than they used to be. However, they are still not as common among lenders as 24-72 month terms. If you think an 84 month auto loan is the right move for you, you have a few options.
Traditional banks are often the first stop for borrowers when it comes to getting auto loans. Many major banks now offer 84 month financing, it’s worth seeing if yours is one of them.
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Some banks offer a discount on your auto loan rate if you have a checking account, savings account, credit card or other financial account. Even if your bank doesn’t, it’s worth considering the convenience of keeping all your banking services in one place.
Credit unions have many of the same advantages as commercial banks, but in the form of member organizations. Although credit unions may offer low rates and low fees, they require membership based on certain criteria to access their loan products.
Credit union membership requirements range from working for a specific employer to donating to an approved charity to paying a membership fee. Many operate nationwide and offer 84-month auto loans as part of their portfolio.
You can also go digital for an 84-month loan. As more people shop for cars online, online lenders are becoming a popular source of financing. You will find many options that offer longer loan terms.
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Just because online lenders don’t have physical branches doesn’t mean they aren’t reputable providers. Many are backed by established banks and some are even the online lending face of a major bank.
With the loan market, rather than contacting individual lenders, you enter your information into a portal and wait for loan offers.
Apart from reducing the legwork, this option allows you to compare loan offers in one place. However, if you use one of these marketplaces, research the lenders carefully. While you may get offers from established lenders, you can also get offers from less reputable ones.
Most car dealers offer their own financing options, and many offer 84-month car loans. You can make big money on a long-term car loan. Dealerships, especially single-brand dealerships, sometimes offer 0% financing, even on long-term loans.
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Don’t assume you’ll get the best deal at the dealer. Car buyers can also find the highest interest rates at dealerships.
Interest rates on 84-month auto loans vary widely, depending on the lenders and borrowers and the vehicles they are financing. While term length is a factor in the overall cost of your loan, it’s not the only one.
Your credit history, income and debt obligations help determine loan rates. But no factor is more important than your credit score. Borrowers with low credit scores pay higher interest rates on average.
The graph below shows the average interest rates for new and used car loans based on various credit scores, according to Experian.
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While an 84-month auto loan may not have the best interest rate, it can be lower than som
e credit cards or other loans. Some people take advantage of the relatively low interest rates of auto loans to refinance credit card debt, for example.
Here’s how a cash-out refinance works: If your car is relatively new and you’ve paid off a good portion of the principal, you have equity in your car. You can get an auto loan for an 84-month cash-out refinance. You can then use the equity to pay off high-interest debt, such as credit cards and personal loans.
A cash-out refinance won’t change your total debt, but you may pay less interest on your debt.
There are many reasons why an 84-month auto loan may not be your best option. Here are a few of them:
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Despite its many drawbacks, an 84-month auto loan may be a good choice for you in certain scenarios, such as:
For people with shorter terms, 84-month auto loans are usually too expensive to recommend. But for those who can’t afford the cars they want without longer loan terms, they can be beneficial.
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