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Old 03-07-2020, 08:46 AM   #1
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2019 25' Flying Cloud
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Financing Length Question...

Hi,

On another forum I just read and interesting thread. Guy said he can afford to finance his new RV for 72 month payments BUT is financing for 20 years!

His plan being to pay as-if 72 month payment but has the insurance of a lower payment should any financial issues or want to take extended time off..

It seems too simplistic and prone to pitfalls but I can't think of any. As long as one is determined and consistent in paying off a 20 year loan in 6 what would be the "problem"? I don't know if one can get a lower interest rate on short vs. long term loans....seems we have to actually pull the trigger and meet with an FO to get real numbers...


Since we're in shopping mode and finding "deals" sooner than we anticipated this sort of scenario may let us get into an AS sooner and cheaper. Our logic being IF we're going to finance isn't starting to pay as good as saving for a down payment? Especially since 2021 AS WILL cost more too?

Thank you!

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Old 03-07-2020, 09:18 AM   #2
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If the rate is X for 72 months and X for 240 months, finance for 240 and pay it off as soon as you can. Generally though, the rate would be higher for a longer loan and unless one is diligent about paying extra in the early months, the extra interest charge will add up. You should be able to get rates before you choose a loan, though you may have to do a credit check or at least know your scores to get close to the "real" number.
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Old 03-07-2020, 09:36 AM   #3
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The problem is the interest is not paid in equal amounts. The banks make it so most of the interest is paid in the first third of the loan.
In order to offset this, the interest rate must be really attractive, which is hard to believe on a 20 yr. loan.
The danger is that many people, although with good intentions, don't pay the loan off.
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Old 03-07-2020, 09:49 AM   #4
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Quote:
Originally Posted by Mollysdad View Post
The problem is the interest is not paid in equal amounts. The banks make it so most of the interest is paid in the first third of the loan.
In order to offset this, the interest rate must be really attractive, which is hard to believe on a 20 yr. loan.
The danger is that many people, although with good intentions, don't pay the loan off.
Yes the APR being the key!

We've been scoring the web and see from 4.5 to 5.99 with supposedly equal credit scores.... So we have to find the AS and then proceed to financing with this idea in mind.

We went into our truck with this scheme in mind but neglected to work the scenarios of length of loan. We just pay more every month!

Thank you!

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Old 03-07-2020, 11:06 AM   #5
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As of this week, long term interest rates are lower than at any time in history. There's a 100% prediction that Fed Funds will drop by another 50 basis points on March 18, when the Fed meets again. If you're going to finance anything, this is a good time to do it.
Just my 2 cents.
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