Long Term Car Loans in 2022: Pros & Cons
While making expensive purchases, people are often restricted because of their purchasing power, they might not be able to pay hefty money at once.
In such scenarios long term loans allow you to buy things of high monetary value by paying the entire amount over a longer tenure and are generally known as long term loans. Car loan and home loan are two examples of long-term loans. A Quick car loan is provided by banks to ensure comfort and financial feasibility to the customers to buy the car and repay the loan over a longer period of time. Although it sounds like a great deal, Long term loans have their own pros & cons.
Easy & Small Monthly Instalments
Easy car loan lets you buy the car without any financial stress by offering repayments as small monthly instalments. While purchasing the car, you just have to pay the margin amount specified by the bank, the remaining amount can be availed as long term car loan. The loan amount sanctioned depends upon your income, credit history, capacity to repay and other criteria subject to the policies of the bank.
Option of Pre-closure
Paying high-interest rates for longer tenure might put you in financial trouble. To avoid this, a Pre-closure facility is given to the customer working capital loan to reduce the loan tenure by repaying the loan early(*Subject to T&C of the bank.) In today’s time, Banks such as Karnataka Bank allows people to get a car loan with a flexible Pre-closure facility.
Higher rate of Interest
One of the cons of long-term loans is the high-interest rates associated with them. The rate of interest might be higher compared to short-term loans because of the longer repayment tenure. Paying interest for a longer period of time might become a financial burden.
The value of your asset depreciates over time. By the time the loan is repaid, the value of your car would be less than the loan amount repaid. This is one of the major drawbacks of long-term loans.
The financial burden due to unpredictable incidents
There are some incidents that are predictable and within our control but some are not. Unfortunate accidents can increase your financial burden since you have to bear the costs of repair as well as the EMIs for loan repayment. Such extra cost can be mitigated by availing various insurance services offered by bank. Karanataka bank in alliance with Bajaj Allianz General Insurance offers motor insurance to prevent the customer from unforeseen financial shocks. Hence it is always advisable to go for Nil depreciation insurance plans or comprehensive insurance policies covering all the risks for your vehicle.
Therefore it is suggested to properly evaluate the pros and cons before opting for long term loans.