Some consumers are interested in a long-term loan. This is also the case when buying a car, because a new vehicle costs several thousand USD. A long term always guarantees low monthly rates, so that the financial burden is not too high.
This is why more and more people are asking for a car loan with a term of 120 months. However, it must be noted that a loan will run for the next ten years. Nobody can know what the future holds and such a long term is only awarded if the credit rating is excellent.
Who gets this loan?
Banks always want collateral when lending. It is the same with car financing. Borrowers with excellent credit ratings will benefit from a 120-month auto loan. Employees who get a normal salary will hardly be able to convince the bank to grant the loan. Officials or those with very high incomes often get the loan. This is because banks cannot be sure that an employee will still have a job in ten years. With an official, however, it is different. Here one speaks of a permanent employment relationship.
What conditions can be expected?
With a car loan with a term of 120 months, it must be expected that the interest rate will be higher than with a normal loan. Banks can also pay collateral with interest. The younger the applicant is, the better the conditions will be. An applicant who will soon retire will not receive the 120-month car loan. As of retirement age, banks are given as risk persons, so that many banks reject the application.
Car financing with residual debt insurance or life insurance
When this loan is taken out, residual debt insurance or capital life insurance is often offered. These should secure the loan. An official should not take out residual debt insurance because it is only intended for people who also lose their jobs. A life insurance policy makes sense for long terms, because if the worst-case scenario leads to the death of the borrower, the family does not have to repay the loan. In that case, life insurance would do it.