What is an auto loan?
An auto loan is a specific type of financing used to purchase or refinance a vehicle. Auto loans are available through dealerships, banks, credit unions and online lenders.
Auto loans let you buy a car you can’t afford upfront. A loan spreads out the cost over time, breaking it up into monthly payments that better fit your budget. However, lenders also charge interest. This means that you end up paying back more for the car than the amount you initially borrowed. Not all lenders charge the same interest rates, so look for the best deal you can find based on your qualifications.
When choosing an auto loan, focus on:
- The annual percentage rate (APR), which is a combination of interest and fees
- The type of loan, which determines the structure of your contract
- The loan term, which describes how long you have to pay it off
Your credit score…