We’ve all been there. Whether your trip to the car dealership is the result of much deliberation or after an unplanned car breakdown, we’ve all experienced the lengthy journey that is searching for a new car. If you’re looking for a new car, you may be wondering what kind of auto loan is right for you.
Types of Auto Loans
There are a variety of different auto loans to support everyone’s situation.
Secured Auto Loan
A major type of car loan is the Secured Auto Loan. These loans offer liens on the vehicle, meaning that the vehicle becomes collateral for the loan and can be repossessed if the borrower chooses not to pay
Unsecured Auto Loan
As the name would suggest, unsecured auto loans are the opposite of secured loans. These loans are more reliant on the borrower repaying the loan and the vehicles are not offered as collateral if the borrower refuses to pay.
Direct Financing takes place when loans are borrowed directly from banks, credit unions, and online lenders.
Indirect Financing takes place when car dealerships partner with outside lenders to offer buyers car loans. These auto loans are usually a bit higher in interest rates as dealerships take a percentage for setting up the loan.
In House Financing
Also known as “Buy Here, Pay Here”, In House Financing refers to car dealerships that offer financing through their own company. Buyers will make payments directly to the dealership.
How Your Financial Goals Affect Your Auto Loan
When thinking about obtaining a car loan, you may have a lot of questions as to how a car loan will affect your financial future. When looking for car loans, there are a few things to keep in mind.
Car loans are notorious for offering loan repayment times. While the low cost monthly payment may look attractive to some, it’s important to remember that you may spend up to 5 or 6 years repaying your loan!
Depending on where you purchase your vehicle, some establishments may not require you to make a down payment on your loan. However, you may consider paying a portion of your loan in advance as to better your financial future down the road.
This is a major factor to consider when shopping around for the perfect auto loan. Depending on your credit score, interest rates can vary greatly and may even lower if you’re able to look into refinancing options later down the line!
The Fine Print
As with any major financial decision in life, it’s always important to read the fine print. Select car loans may include specific repayment terms or late fees. It’s important to educate yourself on all terms of your auto loan!
Obtaining your Vehicle
When shopping around for your vehicle, it’s important to assess all your options. Once you’ve found the right vehicle for you, you’ll be able to partner it with the right auto loan for your financial future!