Car loans come with a few options. Deciding on the term of your loan also known as the length of your loan is an important part of the decision-making process. A 36-month car loan has a few perks. For some people, it is a great way to pay off a car loan relatively fast. Trying to determine if it is the right choice for you and your family can still be difficult. Knowing what is good and what is bad about a short-term car loan will make the decision process a little bit easier.

The Pros of a 36-Month Car Loan

  • Lower Interest: Generally speaking, the shorter the car loan, the better the interest rate. Shorter loans tend to have a lower risk of default by the borrower. Essentially, consumers pay less interest rather than extended loan payments over a longer period of time.
  • Debt Free, Faster: A common car loan is 48 or 60 months. Yes, choosing a short-term car loan locks you into a larger payment versus a 60-month car loan. But more of your payment goes to principal and you’ll be on a path to getting out of debt in a reasonable amount of time.
  • Never Get “Upside Down”: Most people do not think seriously about the consequences of owing more than a vehicle is worth. With shorter term loans, you will be paying down the debt at a faster rate than the vehicles depreciation. It’s a good idea to keep an eye on your vehicle’s value. Check out KBB.com to see the approximate value.

The Cons of a 36-Month Car Loan

  • Higher Monthly Payments: Committing to a 36-month auto loan means you are committing to a high monthly car payment. Depending upon your income level, this may or may not be a big deal. Just be prepared to have less disposable income until you’ve paid off your auto loan.
  • Less Money for Emergencies: While you will pay less in interest, you’ll have less money every month to put away for emergency expenses. It is very important to figure out your budget before agreeing to the car loan terms. Make sure the likelihood of being tight on funds is very low throughout the entire course of your loan. It makes no sense to agree to speed up the repayment process just to default and have the vehicle repossessed.

Other Car Loan Term Considerations

You’ll need to fully explore all of your financing options. In some rare cases, buyers can get the same interest rate on a 48-month loan as they can on a 36-month loan! Some consumers take the longer loan term, but pay additional principal every month. The advantage here is that if you run into a financial jam, you can pay the minimum for a while.

Paying extra on car loans does not work for everyone. You have to be financially disciplined – often the temptation of accessible cash is just too much. Locking yourself into a short-term loan and committing to paying it off quicker only works if you can stick with it.

Refinancing is an option for current owners. New online tools are easy to use and can show your options in about 5 minutes. Standard Auto Financing has built a network of lenders who will fight for your business, which usually means great rates and lower monthly payments!