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The Ultimate Guide to the Different Types of Auto Loans



The Ultimate Guide to the Different Types of Auto Loans

Americans buy a lot of cars each year, with around 41 million used cars selling in 2021 alone. That’s to say nothing of the approximately 15 million new cars sold in 2021.

Of course, buying cars isn’t quite the same as what people remember from the olden days of five or ten years ago. Used cars once represented a cheap alternative to new vehicles. As pandemic-related problems with labor and chip availability drove down new car production, used car prices rose steadily.

These days, you typically need auto loans for both. Of course, there are different types of auto loans out there. Keep reading for a breakdown of the different types of loans that can help you finance your next vehicle purchase.

Secured Loans

Secured vehicle loans are by far the most common kind of auto loan issued for vehicle purchases. With a typical secured loan, the borrower puts up an asset that can serve as collateral in case of default on the loan.

In most cases, the vehicle itself serves as the collateral. The lender secures the vehicle with a lien. As long as the lien exists, you can’t transfer the title.

While one could theoretically put up other kinds of assets as collateral for the loan, such as real estate, it’s not a common practice with auto loans.

In the event that you don’t make the necessary payments on the loan, the lender repossesses the vehicle. The lender can sell off the car or truck to pay off any balance left on the loan.

You may also run into balloon loans as an option for a car loan. Balloon loans let you pay smaller monthly payments.

Where it gets tricky is that you must make one large payment as the last payment to close out the loan.


The payments on auto loans can happen under a few different arrangements. Your average car loan will divide up the payments across the length of the loan. So, if you borrow $15,000 including the interest with a five-year loan, you’ll pay out around $250 a month for sixty months.

The catch is in how the loan organizes the interest. With some, you pay an equal amount of interest each month. That means that paying off the loan early will mean paying the full amount of principal and interest.

Other loans frontload the interest payments, meaning you primarily pay off interest for the first few years of the loan. However, with these loans, additional payments will often pay down the principal of the loan. That lets you pay off the loan early and reduce the total interest you pay.

Unsecured Loans

The other and less common option is an unsecured loan, which is typically a personal loan. Most people only look for these kinds of loans when they can get a traditional car loan.

For example, many lenders will only finance cars that have less than a specific amount of mileage or are under a certain age. Some lenders will only finance vehicles over a certain price threshold. If the car you want has too much mileage, is too old, or doesn’t cost enough, you simply can get a traditional auto loan.

You can also run into trouble finding financing for a vintage or classic car because they typically violate at least one requirement from an auto loan provider.

The main advantage you see with this type of loan is that the lender puts no restrictions on how you use the money. You can use it to buy a car that other lenders wouldn’t finance. The real catch is that you often end up paying higher interest rates and other charges.

Where to Get Auto Loans

There are several common sources for auto loans. Accessing the different options can vary based on your circumstances.

Dealer Financing

Probably the most common option for buyers is dealer financing.

With dealer financing, the dealership itself doesn’t finance the vehicle. Instead, they work with a particular lender or group of lenders to provide you with loan options.

A variation on this is the buy-here-pay-here loan. Dealerships sometimes offer these loans to customers with very bad credit scrores. While it can let you access financing for a vehicle, you’ll often pay outrageous interest rates on the loans.

Banks and Credit Unions

Banks and credit unions will often offer auto loans. Banks will routinely offer financing to both account holders and non-account holders, although account holders can often get better financing terms.

Credit unions operate in a similar fashion to banks, but the account holders are the ultimate owners of the organization. In most cases, credit unions only offer financing to member of the credit union. The good news is that most offer you options to join.

Online Lenders

Another option that has grown more popular in recent years is online lenders. In many cases, what you get is a site that gets you offers from multiple lenders. This doesn’t stop you from applying to individual online lenders, but sites that aggregate offers can save you a lot of time.

It’s worth exploring all of your financing options before you commit anywhere.

Things You Should Consider

A car loan will often last for three years or more, so you want a full grasp of what the loan entails. Check the terms very carefully and look for hidden fees that can drive up the overall costs.

You should also make a point of looking around for the best auto loan rates available to you. This can make a big difference if you have a shaky credit score.

Types of Auto Loans and You

When it comes to auto loans, it’s generally less about the types of auto loans and more about the specific details. The vast majority of car buyers will wind up with a secured auto loan either through the dealership or through a bank.

What you want to focus on are the fees, interest rate, and how you’ll pay that interest over time.

Looking for more personal finance tips? Check out the posts in our Business section.



Homestays in Coorg: 5 Reasons Why It Is Perfect For Family Getaways



Homestays in Coorg: 5 Reasons Why It Is Perfect For Family Getaways

The latest vacation trend has people living in local homes rather than hotels. There are many reasons for this. However, the primary reason remains that every tourist wants to enjoy the authentic local culture. What better way to do so other than staying in a villa in Coorg?

Local Experience Is Always Authentic

The reason why people travel is to experience new things. Wouldn’t you like to experience the local atmosphere if you visit a place? When you are on vacation and choose to live in a homestay, you find yourself amidst the most local and authentic experience.

Hotels can have many luxuries, but all those pale in comparison to the homely atmosphere of a homestay. You can truly enjoy the essence of a place when you stay with and mix with the locals. The locals can show you around and make your visit more memorable.

Your Home Away from Home

We all love enjoying our favourite activities from the comfort of our homes. Hotels do not offer the same level of comfort. However, when you stay at a private villa, you receive the convenience of being home.

You can enjoy the view from the balcony at the villa and even swim in the private pool villa in Coorg. You can also form connections with the other visitors and end you making new friends at this new place. Staying in a homestay allows you to enjoy the same basic amenities and a comfortable atmosphere back at home.

Quality Time

Homestays are perfect for you if you want to escape the hustle and bustle of your life. Homestays only allow a few people to stay at the accommodation. It means you can enjoy more time and not have to experience a crowd.

Also, since most homestays are residential, you can enjoy its benefits. For instance, a villa in Coorg has easy transport access, and you can easily spend time with your family and friends at the homestay.

Beneficial for The Local Economy

Mostly local families run homestays which are simple establishments. It helps to contribute to the local economy as you contribute to it. Also, with homestays comes privacy. In commercial hotels, you will not have any privacy if you want to use the pool or bathhouse. But, at your homestay, you can enjoy your time in the private pool villa in Coorg.

Enjoy Good Company

Another great thing about homestays is the troop of people you can meet. You can make new friends. The owners of the place and even the local people are very welcoming and accommodating. You can have meaningful conversations and even form a great bond with them.Book a homestay to enjoy your vacation and explore the local culture, food, pace and people. Make the most of your vacation with homestays as they are inexpensive compared to private hotels, and you can make unforgettable memories.

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