Auto Loan

Financial Dictionary -> Loans -> Auto Loan

Most people who are in the market to buy a car find it necessary to secure an auto loan. There are many companies that offer auto loans. So many, in fact, it's often difficult to decide which company to deal with. However, educating yourself on the different types of auto loans will help you choose wisely.

First decide if you want to buy a new or used car. When buying a new car, not only is the price usually higher, but so is the term, or length of the loan. This is known as a long-term auto loan. When buying a used car, the price is lower, usually making it a short-term loan.

Auto loans usually range from 36 months, 48 months or 60 months. The longer the term, the more you end up paying. On the other hand, the shorter the term, the higher the payments may be. It's up to you and your creditor to decide what type of loan is best for you. A good question to ask yourself is, How much can I afford?

Next you should decide where you want to get your loan. Should you go to a bank or a credit union? Should you apply for a loan online? Should you go through the car dealer? Or should you apply for a personal loan instead of an auto loan?

Generally, the interest rates for auto loans are lower at credit unions than other lenders. Online loans, of course, are simple. You can apply without ever leaving the comfort of home. Also, if you have a poor credit rating, you may be able to secure a loan online that will help in repairing your credit, provided you make timely payments. Securing a loan through a car dealer usually means a higher interest rate, but most of the time, there is no trouble getting approved.

Whichever type of loan you choose, make sure you do your homework and consider all your options first. That way you'll make sure that you're getting the type of loan you want as well as a good deal on your automobile purchase.