Pros and Cons of Extended Car Loans

By Angela Monroe - December 23, 2019

If you have bad credit, you may have considered getting an extended car loan. There are lots of pros and cons to taking this step and it’s important to understand both sides of the argument before you make your decision.

It’s always important to seriously think about what you can afford. If you’re looking to get one it’s going to be a long time before you’re able to pay off your car loan. Some people find it helpful to look at cheaper cars, which they may be able to pay off quicker.

What is an extended car loan?

Generally, any car loan that has a loan term of over 60 months is considered an ‘extended car loan’. It means that you have much longer than usual to pay back the full amount you have borrowed on a loan. This can be tempting but there are lots of additional costs that you need to consider.

The pros of extended car loans

Extended car loans for people with bad credit can be one of the only ways to get a car loan when you need a vehicle but simply don’t have the cash for a deposit. Many people see these loans as payment relief for those who need it – and if the car you’re wanting to buy is going to help you to get to a job each day it can be the step you need to help you back on the right financial track.

The biggest pro of extended car loans is that you’ll be able to secure a low monthly payment. As a loan type, extended car loans often aren’t the most preferred but if they’re the only alternative to not having an (often much needed) vehicle then you can see them as a positive thing.

As long as you’re aware of the risks, extended car loans with bad credit can be really helpful. Always ensure that you’ll make all your repayments on time and in full – and review your loan regularly to check that you are paying off everything that is required.

You’ll also want to be fully aware of any early repayment fees or charges that you may be liable for with an extended car loan as this could reduce your ability to get out of it earlier if you’re able to.

The cons of extended car loans

Generally, extended car loans mean higher overall costs for the vehicle. It can be misleading as dealerships or lenders offer low monthly repayments yet these are often dependent on large deposit or the extended loan term itself (which means they’ll make money back on the interest you pay for a longer period of time)

If you’re getting extended car loans with bad credit, you’ll need to budget very carefully – taking into account, not just the monthly repayments but adding in the interest you’ll be expected to pay on top of these instalments. Extended car loans will always have higher interest rates than standard term loans so be aware of exactly what you’re signing up for.

Another downside of extended car loans is that you’re likely to owe more money than the car is actually worth. This might require you to buy gap insurance (another cost to consider in your budget) which will make sure you’re covered on the difference between the worth of the car and what you owe on the loan.

Your decision

Extended car loans with bad credit aren’t necessarily a bad thing. There’s a lot of bad publicity around extended car loans due to the high rates of interest and the overall higher costs that they entail.


Yet if an extended car loan is the only way of getting you and your family on the road, it could be a step that you’re willing to take. If you have bad credit, it’s important that you make very careful decisions before you take out an extended car loan. If you’re feeling unsure about whether it’s the right step for you, speak to Loans for People with Bad Credit to get helpful advice from people who understand.

We have years of experience working with people with bad credit and can help direct you to the best lenders for your individual situation.

Angela Monroe
Angela Monroe is the Community Manager at The Positive Group, specialising in giving people the information that they need when they need it, and putting you on the path to a fair financial future. She has 8 years of experience in helping Australians find the right finance solutions, and regularly contributes articles to empower Australians with the knowledge they need to become financially healthy.


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