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What is an Auto Loan?

Written by: John Mussi

An Auto loan is basically another name for a car loan. An auto loan is an agreement between a lender and a borrower in which the lender gives the borrower money and the borrower promised to pay back the amount of the loan and the interest. Auto loans are only offered for the purpose of purchasing a vehicle.

Auto loans are the most popular type of loan that people apply for. Auto loans, as the name suggests, are unsecured loans specifically designed for the purchase of a vehicle.

An auto loan is a type of credit offered by a bank or other lender for the specific purpose of buying a vehicle. You then pay back the loan over a set period of time.

If you are taking out an auto loan it is very important that you find out the Annual Percentage Rate (APR) that the lender is offering. This is the yearly charge for the loan, a low APR means a cheaper loan.

The payments you make consist of both the principal amount of the loan plus interest. With this type of loan you own the vehicle from the time you buy it. Auto loans are form of personal loan of which there are several basic types with slightly different conditions attached.

Auto loans can be seen as the riskiest of loans from the lender's point of view. This is because an auto loan is for an asset that depreciates very quickly. Thus you will find that auto loans have generally a higher rate of interest than any other type of loan.

One of the advantages of getting an auto loan is that when you get it before you go to the dealer, you can negotiate as a cash buyer. Often you will save money when you negotiate from a cash buying position.

The main disadvantage of an auto loan is that, like any other loan, it must be paid back. Before you get a loan, make sure you are capable of making the monthly payments. You can seriously damage your credit if you default on an auto loan.

You may freely reprint this article provided the author's biography remains intact:

About the Author


John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the www.directonlineloans.co.uk website.


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