Stretching a car loan out to seven years in length is one of the most effective methods to make your monthly instalments more affordable. At Savvy, we’re partnered with a range of lenders who allow you to choose a loan term of seven years.
We’re dedicated to helping you find the best loan available for your needs. Our diligent consultants will review the top offers on the market, only considering those that go up to seven years, to help you secure the cheapest and most suitable car finance. You can get the process started with a quick quote, which will only take a few minutes to fill out.
How do 7-year car loans work?
Car loan terms range from a minimum of one year up to a maximum of seven. A seven-year loan is no different from any other car loan in terms of its structure; it’s an option for borrowers who wish to stretch out their repayments over a longer period. Finding the right term for your loan can make it easier for you to manage your finances.
How can I be approved for a 7-year car loan?
Lenders determine loan terms based on several factors. The first of these is your profile as a borrower. If your lender isn’t confident in lending the amount you’re asking for and allowing you to repay it over seven years, you won’t be approved. This may be because of your income, expenses and other liabilities, but a poor credit score and a record of struggles with other similar loans will also count against you.
The other main factor when it comes to loan terms is your car’s age. Some lenders will set their car age limit at 15 years by the end of the loan term. Therefore, applying for a seven-year car loan, you may only be able to purchase a car no older than eight years. However, some lenders may extend this to 20 or even 25 years, while some may not enforce an age limit for classic cars (or you can take out an unsecured car loan).
Your age may also make a difference. Lenders will determine your situation more carefully if you are heading towards retirement when you apply for a car loan, for instance.
How much will my 7-year car loan cost?
There are several factors that can influence the cost of your seven-year car loan. These include:
Interest rates
The lower your interest rate, the more you’ll save on your car loan. The following table demonstrates how much you can save with a cheaper loan rate:
| Interest rate | Repayments | Total interest |
|---|---|---|
|
7.00% p.a.
|
$453
|
$8,034
|
|
8.00% p.a.
|
$468
|
$9,278
|
|
9.00% p.a.
|
$483
|
$10,545
|
|
10.00% p.a.
|
$499
|
$11,835
|
|
11.00% p.a.
|
$514
|
$13,149
|
Calculations based on a $30,000 car loan repaid monthly over seven years.
Loan size
Because interest is calculated based on the balance of your loan, higher amounts will lead to more interest overall. This is laid out in the table below:
| Loan size | Repayments | Total interest |
|---|---|---|
|
$30,000
|
$461
|
$8,653
|
|
$40,000
|
$614
|
$11,537
|
|
$50,000
|
$767
|
$14,421
|
|
$60,000
|
$921
|
$17,305
|
|
$70,000
|
$1,074
|
$20,190
|
Calculations based on a car loan repaid monthly over seven years at 7.50% p.a. interest.
Additional repayments
Some lenders may give you the option of making additional repayments, although this may be associated with early break fees in many cases. If you’re able to pay off your loan ahead of schedule for free, this is how much time and money you could save:
| Extra payment | Total payments | Total interest | Total saving | Total loan term |
|---|---|---|---|---|
|
$0
|
$461
|
$8,653
|
N/A
|
Seven years
|
|
$50
|
$511
|
$7,513
|
$1,140
|
Six years, two months
|
|
$100
|
$561
|
$6,643
|
$2,010
|
Five years, six months
|
|
$200
|
$661
|
$5,401
|
$3,252
|
Four years, six months
|
Calculations based on a $30,000 car loan repaid monthly over seven years at 7.50% p.a. interest.
Why apply for a car loan with Savvy?
The pros and cons of secured car loans
Pros
-
Lower interest rates
Interest rates for secured car loans are often lower compared to unsecured loans because there's less risk for the lender, helping to reduce the overall cost of the loan.
-
Higher chance of approval
As the car acts as collateral to back the loan, borrowers with lower credit scores or limited credit history may have a better chance of getting approved.
-
Improves credit
Making consistent and on-time loan repayments can help improve your credit score, demonstrating to future lenders that you are a responsible borrower.
Cons
-
Risk of repossession
If you fail to make payments, the lender has the legal right to repossess the car to recoup their losses.
-
Restrictions on car choice
Because your loan is secured, your car must hold enough value to recoup lost funds in the event your default on the loan. As such, there are stricter requirements on which cars you can buy.
-
Mandatory comprehensive car insurance
Lenders often require comprehensive insurance to be taken out on the car, which is the most expensive car insurance option and can increase your overall expenses.
What are my options for paying off my loan early?
-
Go for a 5-year car loan
Although seven-year loan terms have grown in popularity, five-year car loans are still by far the most widely used loan term when it comes to car financing. These serve as a comfortable middle ground between longer terms up to seven years and shorter terms down to one. While a $30,000, seven-year loan repaid monthly at 7.50% p.a. would set you back $8,653, a five-year loan on the same terms would only cost $6,069 at just $140 extra per month.
-
Consider a down payment
If you pay a deposit upfront when purchasing your car, you won't need to borrow as much from your lender. Assuming the amount you can afford doesn't change, your required loan term is likely to be shorter. For instance, by adding just a 10% deposit ($3,000) to your $30,000, seven-year loan at 7.50% p.a., you would save almost $900 in interest.
-
Add a co-borrower
You can add a co-borrower to your loan so that both of you are contributing to its repayments. This will enable you to pay back the loan at a faster rate. Your co-borrower will usually be your partner, but they can be a parent in some cases.
-
Refinance
You can also choose to refinance your 7-year loan into a shorter loan. Not only will refinancing shorten your repayment schedule, but if you have a good track record on previous loans, you may be able to get a loan with a lower interest rate. Talk to one of our consultants to find a shorter term loan that best suits you.
-
Early termination
Most lenders allow borrowers to repay their loan ahead of schedule. However, there might be an early termination fee involved. In this scenario, you should work out whether it's more cost-effective to pay out your loan early or continue to make repayments.
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