Sara Routhier, Managing Editor of Features and Outreach, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming worl...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Sep 9, 2011

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The two types of auto loans for which you can apply are used and new, based on whether you are buying a new or used vehicle.

A new car loan will most likely be easier to receive because the risk for the lender is lower. For a new car, the interest rates are often lower and the terms are often better. For a new car, the amount borrowed must usually to be paid off in three to six years, while repayment time for a used car is often between 48 and 84 months.

To get a loan for a used car, you will need to demonstrate greater financial standing – meaning a higher credit score – as there is a higher risk of the car breaking down or wearing out before you pay off the loan.

There are two different sources for auto loans: dealership or private. The most convenient source is the car dealership from which you purchase your vehicle. That way, you can take care of buying and financing the car in one place at one time. However, this can sometimes be more expensive because of additional fees.

You can also finance your car through private lenders like banks or credit unions. Credit unions are non-profit and function like a checking account, with members depositing money that then becomes available for a loan. Employers and other entities like churches can have credit unions that individuals can join. This option often offers a lower rate than other sources, but you can only apply for it if you belong to a credit union, making it less accessible than banks or auto dealerships.