Since autos are generally the second biggest asset people will acquire during their lifetime, an auto secured loan is normally how they purchase one. This type of loan is called a secured loan simply because the amount you are borrowing to buy the vehicle is secured through the title of the vehicle. That is the title may be in your name, depending on the source of your auto secured loan, but the lender is listed as a lien holder on the title and cannot be sold while you still owe money on the loan.

Your credit history will determine not just the interest rate you will be charged on the loan but also how much security the lender will require before you get the car. For instance, a person with a flawless credit history may be able to receive an auto secured loan for the price of the vehicle, and the lender will not consider the depreciation on the vehicle once you drive it off the lot.

A person with less than stellar credit, but still not bad, will typically have to supply a down payment to reduce the amount of the auto secured loan to a level that will be lower than what the car will be worth when it leaves the lot, usually about 70 or 80 percent of the value.

Lenders Protecting Their Financial Interests

Should a borrower default on an auto secured loan the lender has the right, under the law, to recover their losses. Typically, if the vehicle is repossessed by the lender after a certain amount of time, which varies from state-to-state, they can sell the vehicle and any difference between what you owe on the loan, plus reasonable expenses for retrieving the vehicle, selling it and legal fees and what the vehicle sold for will be your responsibility.

Before you take out an auto secured loan you should carefully check the company with which you’ll be doing business. The Better Business Bureau in your area can caution you if a company has complaints concerning predatory lending practices and how well they follow the agreement they made with the customer at the beginning of the deal.

Still, unless you are willing to pay cash for the vehicle, there is a good chance that an auto secured loan will be how you buy a vehicle. Caution is well advised to make sure the lending company is legitimate and honorable in its dealings.

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