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60 Month Auto Loan

The concept behind a 60 month auto loan is a very simple one: a person has sixty months or five years to pay off the auto loan.

This means that a borrower has to make 60 payments before they get title to the car. Under a normal loan arrangement, the lender keeps the title to the car. This enables the lender to repossess or take back the car if the payments are not made.

The main thing a person with a 60 month auto loan needs to remember is that the lender keeps ownership of the car until the loan is paid off. The lender will usually require the borrower to keep the car insured and place other requirements on the loan.

How a 60 month auto loan works

The 60 payments a person has to make on a 60 month auto loan will pay off the principal and the interest of the loan. The principal of the loan is the actual purchase cost of the car, while the interest is how the lender makes its money. The interest rate will determine the cost of the loan.

Each of the 60 payments will have to be made on time to keep the loan current. If payments are missed and late the lender will probably charge the borrower some sort of penalty or additional payment.

One thing borrowers should remember is that they maybe still be responsible for paying off a 60 month auto loan even if the car is repossessed. There are only two circumstances where a borrower will not be responsible for paying off the car loan. The first is that the lender makes enough money reselling the reposed vehicle to cover its costs. The second is for the borrower to declare bankruptcy which will absolve the borrower of her debts.

60 month auto loans maybe a bad deal

A 60 month auto loan can be a very bad deal for the average borrower especially on a used car or a lower end new car. The reason for this is that 60 months equals five years and cars depreciate in value over time.

This means that the car will be worth a lot less than the cost of the loan when it is paid off. Most buyers will never be able to get their money back by selling off a car after completing their 60 month loan.

The only time a 60 month auto loan makes sense is if the borrower is buying a higher end car that will keep its value or increase in value. Higher end cars include luxury models like Mercedes, Cadillac and Lexus. Checking the resale value of a car can help a borrower get a vehicle that will keep its value.

If the borrower plans to trade the car in before five years; as most auto buyers do, it may make more sense to lease a car. Leases can be more flexible and a better deal for average buyers than 60 month auto loans.

Pay off the 60 month auto loan

A borrower should always try to pay off a 60 month auto loan early. A borrower should do this because the sooner the loan is paid off the sooner the borrower can stop making payments. Paying off a 60 month auto loan can save a borrower several hundred dollars a month.

Lenders will gladly take payments that are over the set amount. Even paying $20-$50 extra a month can help a borrower pay off the loan earlier and faster.