Pros & Cons of Extending Your Car Loan

Taking a car loan is a long-term commitment. You know that you’ve got to repay a fixed amount every month for a fixed period of time. But circumstances change, life happens, and you may be facing a situation that’s straining your finances.

However, missing a loan could affect your credit score and impact your loan as well. In such a situation, you can extend your car loan. Lenders would be willing to help you with this, provided you discuss it with them beforehand. But extending your loan will also mean paying more over the length of your loan term.

In this blog, we will help you understand the pros and cons of extending a car loan.

Pros of extending your car loan

1. Lower Monthly Payments

By extending the loan term, you can spread out your monthly payments over a longer period of time and end up with smaller installments. This makes it easier for people to manage their finances, especially for those who have tight budgets or other obligations.

2. Avoiding Possible Late Fees

You can steer clear of any late fees or penalties that may arise from missing payments by obtaining an official extension.

3. Maintaining Your Credit Score

When a lender agrees to an extension, they usually don't notify credit bureaus of late payments, which preserves your credit score.

4. Buys Time

An extension gives you the breathing room you need if you think your financial condition will improve soon.

5. Access to New Vehicles

Extended car loans allow consumers to purchase newer, more expensive cars that they might not otherwise be able to afford. Customers can now take advantage of the latest innovations, enhanced fuel efficiency, and the newest safety features.

Read: Short-term vs. Long-term Car Loans: Which is Better?

Cons of extending your car loan

1. Longer Loan Term

Because the loan term has been extended, you will be in debt for a longer amount of time.

2. Accrued Interest

Interest typically keeps adding to the outstanding debt even when payments are postponed, increasing the total amount of interest paid over the course of the loan.

3. Depreciation

Since cars depreciate over time, longer car loans increase the likelihood that the loan total may exceed the vehicle's market value. If there arises a need to trade the vehicle in or sell it before the loan is paid off in full, this might cause difficulties.

4. Financial Strain in the Future

If payments are delayed, it may result in larger final payments at the end of the loan term or higher monthly installments in the future.

5. Mentally Taxing

Knowing that the debt hasn't been paid off can make the prolonged commitment mentally taxing for certain people.

While extended auto loans might offer much-needed financial relief during difficult times, they are not without their problems. It's critical to approach the choice with a clear assessment of your financial trajectory and a thorough awareness of all of its ramifications. By doing this, you can decide what best suits your long-term objectives and financial well-being. If you are struggling with car loan payments, Approval Genie's PaymentAssist program can help you by offering direct financial assistance and personalized support to regain control of your finances. Simply notify us in advance, provide documentation, and receive support to create a personalized financial plan. Contact us today!