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Auto Loan Examples

We will use the example of a $30,000 car loan as this seems to be about average for new and used cars in 2021. With a credit score range of 350-520, the average rate is close to 20%.

For a 6-year loan, your monthly payment is $718 a month and you will pay back $21,738 in interest on top of the original $30,000 owed for the vehicle. It will take about 4 years to hit the halfway point causing you to be in negative equity through most of the loan.

This means if you get in an accident, or the car breaks down, you will still owe over half of the balance of the loan even if you get a new vehicle. You can’t trade in the car as the value is less than what is still owed even 4 years later.

With a credit scores range of 520-600 the average interest rate is around 12.5%. This would put your payment at $594.34 a month for 6 years and the total interest paid is $12,792 on top of the original $30,000. It will take a little over 3 ½ years to hit the halfway point still making it carry negative equity till close to the end of the loan.

With a credit score range of 720-850, the average interest rate is around 3%. This puts the payment at $455.81 for 6 years and the total interest paid is $2,818.34 on top of the original $30,000. This will take right at the 3-year mark to hit the halfway point. By the end of year four, only $10,604 will be owed on the vehicle.

Clearly you can see that the $262.77 with someone who has a poor score and $138.53 for someone with below average per month eats away at savings which makes the next emergency that much harder to get through.

Most families have 2 cars so, when you apply this times two, the amount people pay in interest is the difference between someone who can save and someone who lives paycheck to paycheck.

Get in touch! We look forward helping you reach your goals.