Hyundai paves the way for riskier 84-month loans

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Hyundai has expanded a program that could make it easier for its customers to approve 84-month financing. According to newsletters sent to dealers, the brand recently increased its maximum “advance rate” to 130%, which could prompt buyers to take out larger – and potentially riskier – 7-year loans.

Hyundai Motor Finance (HMF) on Wednesday began offering a higher “prepayment rate” of up to 130% on 84-month loans. The number represents the maximum amount a lender is willing to lend, usually expressed as a percentage of the price. If you buy things like add-ons, it might make funding easier.

However, this could encourage customers to roll over negative equity from a current car. By increasing its limit on what it will allow on longer loans, the automaker could pave the way for larger and potentially riskier auto loans. All of this could come at a cost that can be masked by the monthly payment of a 7-year loan.

While it’s no secret that new cars are more expensive now, the ability to convert negative equity into a 7-year loan could be risky. While it is possible to get a reasonable monthly payment, this type of situation could put buyers “upside down” and longer since the amount owed is not going away.

While we don’t have specific pricing details, we do know the offer has been extended from Arizona to other western states. It is also limited to interest rates called standard rates. Prior to the pilot’s expansion, this meant interest rates of 5.15%, but up to 7.45% based on a FICO score ranging from 680 to 699.

If you don’t have top-notch credit, this could be an expensive prospect. For example, a $ 40,000 fence would cost about $ 51,454 based on a rate of 7.45% for 7 years. Even though the estimated monthly payment would be lower than that of a 6-year loan, the total amount paid in interest can make the longer loan more expensive.

84-month loans aren’t for everyone, but the option of scoring a lower monthly payment can be tempting. Hyundai isn’t the only company making the changes. As we reported earlier this month, Ford Credit recently removed its minimum FICO for 84-month funding as part of an effort to expand the deal to more customers.

Nissan has removed its proof of employment requirement on certain pre-approved loans. The company’s captive financing arm, NMAC, cited improving economic conditions as the reason. These types of changes could have pros and cons if you decide that a longer term loan makes sense based on your situation.

A Hyundai spokesperson did not respond to multiple requests for comment.

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