Why Americans’ loans are taking longer to pay off
Buyers of homes or new cars might be better off waiting to borrow money from banks. But if you must go ahead, either face taking on a big monthly payment, or stretching out the loan term to keep the monthly bill down – as many are doing.
New car loans lasting 73-84 months (over six years) rose to 34.4% of the market in 2022 from 28.6% in 2018, according to car information site Edmunds. A few borrowers are going even longer, with less than 1% of new car loans lasting 85 months or more.
“It’s a reflection of the world we live in: Transportation affordability is a significant problem, as is housing,” said Ira Rheingold, executive director of the National Association of Consumer Advocates.
“More and more dealers are offering extended loan terms: Instead of three or four or five years, they are now going way beyond that,” Rheingold added. “It’s the same thing with housing: Sometimes the only way to get someone into a house is to increase the mortgage length.”
Ultra-long loan terms are showing up in the housing market.
Homeowners straining to pay their Federal Housing Administration mortgages can now apply to have their loans extended to 40 years to reduce monthly payments.
(REUTERS)
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