Many borrowers ask if it’s better to take on a longer loan term if they have bad credit. The general rule of thumb that financial experts recommend is that you take on the shortest car loan term possible, especially if you have bad credit. Just how short depends on what you can afford. If you’re concerned about a longer loan term, the good news is that there are ways you can make it more affordable.

Long-Term Car Loan Risks

Should I Take on a Longer Loan Term with a Bad Credit Auto Loan?Sure, a longer loan term means a lower monthly payment, but are the risks associated with it worth it to you? This is something you should be thinking about, especially if you have bad credit.

If your credit isn't great, you’re likely to qualify for a higher than average interest rate. This increases the overall cost of a loan. Additionally, the longer a loan is, the more interest charges you end up paying. This makes it especially troublesome for consumers with poor credit to take on a longer loan term.

Another risk associated with long-term loans is negative equity. Negative equity is when you owe more on the loan than your car is worth. Most borrowers have negative equity at some point, but a longer loan term means the vehicle remains in a negative equity situation longer. At the same time, the longer you keep a car, the more it depreciates.

Finally, the last risk is that you increase the chances of your vehicle needing major repairs while the loan is still open. Alot can happen over the course of six or more years; cars experience wear over time, and the chance of it needing major repairs increases.

In addition, if your vehicle gets stolen or totaled during the loan term and you don’t carry GAP insurance, you may end up stuck paying for a car that you don’t have or isn’t operable.

How to Make Your Car Loan More Affordable

If you don’t want a longer loan term – or are worried about only being able to afford a vehicle with one – there are ways you can make the overall cost of the auto loan more affordable.

Before you jump the gun and visit a dealership, first make sure you have a budget. You can use our Car Loan Estimator and Monthly Payment Calculator to get an idea on how much vehicle you can afford.

Once you have an idea of where your finances stand, you should consider these three tips that can help you save money on an auto loan, and possibly avoid a longer loan term:

  1. Make a bigger down payment – You're typically required to put a small amount of money down on a bad credit car loan. However, the bigger the down payment, the more money you save on the total interest paid over the loan term. If you make a sizable down payment, you may be able to afford a shorter loan term.
  2. Add a cosigner or co-borrower – When you add a qualified cosigner or co-borrower, you get the chance to qualify for a better interest rate than you would on your own. If your interest rate ends up being lower, it might be possible to opt for a shorter loan term.
  3. Consider your vehicle choice – The type of car you pick plays a key role in how affordable your auto loan is. Generally, new vehicles are eligible for lower interest rates than used ones, but their selling prices are higher, whereas the opposite is true for used cars. You should also consider reliability and safety ratings – especially if you’re considering a used vehicle.

Get the Car Buying Process Started

When you feel confident that you’re ready to get an auto loan, let Auto Credit Express be your guide. We work with a nationwide network of dealers with just the type of lenders to help you during or after a bankruptcy.

Just fill out our fast, free, and secure car loan request form, and we'll get right to work matching you with a local dealership.