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Used Car Loan
Explanation:
Purchase loans for used cars typically charge higher interest rates and have shorter terms than those for new cars. This speaks directly to the inherent differences between new and used cars. New cars are effective collateral given that they will still hold a great deal of value if a buyer defaults on his loan after a few months or even years. The lender can therefore simply sell the vehicle to recoup amounts owed. In addition to not being worth very much to begin with, used cars depreciate in value very quickly. Lenders therefore must mitigate risk in other ways.
Our Thoughts:
Before taking out a used car loan, make sure the vehicle you're using it to purchase will last beyond the loan's term. You don't want to end up making payments on a car that's long ceased being of use to you, after all. In addition, you should consider whether a new car would actually be more affordable in light of the relatively high monthly payments you'd have to make toward a used car loan in light of its higher rate and shorter term. A new car will also have trade-in value when you again decide it's time for some new wheels. Regardless of whether you ultimately opt for a new or used car, make sure to compare loan offers in order to find the best deal.