What are the different kinds of auto loans?
Apply for a Loan
Secured with SHA-256 Encryption
UPDATED: Sep 9, 2011
Advertiser Disclosure: We strive to help you make confident loan decisions. Comparison shopping should be easy. We are not affiliated with any one loan provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about loans. Our goal is to be an objective, third-party resource for everything loan related. We update our site regularly, and all content is reviewed by experts.
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.