The Different Types of Auto Loans, Explained

So, you’re thinking about purchasing a new car. As exciting as it is to purchase a vehicle, it’s important to know the ins and outs of different auto loan options. This way, you will be confident through any financing process. The good news is you have many choices because each financing option caters to various financial situations.

Whether you have great credit or could improve, you should learn about the different types of auto loans to ensure the best purchasing experience.

Title Car Loan

You can take out a title car loan if you already own a vehicle. A title car loan allows you to take out a loan after you’ve paid off the car payments. The lender will place a lien on the vehicle and take ownership of the title. In other words, your vehicle will act as collateral if you don’t repay the loan.

Used Car Loans

A used car loan is another auto loan to know about. You can obtain a used car loan from a lender, credit union, dealership, or bank. If you’re looking to buy a 30-year-old car to rebuild or simply wish to purchase a used auto from a car lot, you can purchase it with this loan.

New Car Loans

You would take out a new car loan to purchase a brand-new, off-the-lot car. These loans are popular because they typically have the best rates due to the vehicle’s anticipated life span. You can obtain these loans through almost any financial institution, dealership, or private lender.

Dealerships often partner with financial institutions and may offer a lower price if you finance through them. However, it’s important to read the fine print and ensure a new car loan is the best financial choice.

Secured Auto Loans

A secured loan is one of the most common types of car loans for used and new vehicles. The lender will place a lien on the vehicle until you’ve paid the loan in full. If you fall behind on payments, the lender could repossess the vehicle. Some examples of secured auto loans include the following:

  • Traditional auto loans
  • Business and fleet auto loans
  • Balloon auto loans

Unsecured Auto Loans

Unsecured auto loans aren’t linked to anything that could be repossessed. People who lack an extensive credit history or a high credit score often finance with unsecured loans. Few restrictions limit how the money can be used, and you have few requirements when acquiring the loan. An unsecured auto loan is great for purchasing an older or inexpensive vehicle.

At Superior Financial, we want you to know about your financing options. That’s why we shared a list of the different types of auto loans. We offer various auto loans in Tennessee that are appropriate for anyone looking to buy a vehicle. Our team is always excited to help you find the best loan so your dreams can come true! Contact us today for more information.

Contact Us