What is an auto loan? Auto loans are like a mortgage, only they are based on a much shorter term and generally have a higher interest rate. Auto loans can be obtained in a number of different outlets, including online venues. You can use an auto loan calculator, available online, to discover roughly how much you will be paying in monthly payments towards the vehicle you wish to purchase.

Just like a mortgage, there are prime lenders and sub prime lenders for auto loans. Sub prime lenders deal with people whose credit is less than perfect. Many people feel that they have to have perfect credit in order to buy a car. This is not true – there are plenty of lenders out there who are willing to give an auto loan to someone with less than perfect credit.

Just like a house is the collateral for a mortgage, the vehicle is the collateral for an auto loan. A finance company holds onto the car title until you pay off the auto loan, at which time they will then sign the title over to you. If you default on an auto loan, they will not wait months to act, nor will they have to go through a lengthy court process. They will simply come to your house and repossess your car. This can happen if you are more than one month behind on your auto loan.

When shopping for auto loans, you should look at term as well as rate. The interest rates for auto loans vary, depending on whether or not you are buying a new car as well as what type of vehicle you are purchasing. You can get an auto loan from the dealership where you purchase your car, although these rates are generally higher than those you can obtain if you look around prior to the purchase. Finance companies that work with auto dealers rely on the fact that you are hyped about buying the car and will take any offer that comes your way. They will often put you in an auto loan that has the longest term at the highest interest rate. Finance companies make their money on interest paid.

One thing that you might not know about auto loans is that just like mortgages, they can be refinanced. You simply have to look for a lower interest rate as well as better terms and apply. The new finance company will pay off the existing finance company, obtain the car title and then you will have to pay them. A refinance can be used if you are having a hard time meeting high monthly payments for your car or if you simply want to save money on your auto loan.

Leave no stone unturned when looking for auto loans. Check out the rates of finance companies, banks and even online venues to make sure that you get the best deal with regard to interest rate and term for your auto loan.

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