An auto loan is a financial arrangement between a car buyer and a bank or other financing entity allowing the buyer to take possession of the vehicle while the financier retains ownership or title. The buyer repays the financing entity, usually in monthly installments including interest, and when repayment is complete, ownership and title revert to the buyer.
Most people who purchase a vehicle take out an auto loan, the most common way to finance vehicle purchases.
The type of loan you qualify for depends on your credit history. If you have good credit, meaning that you have a history of having paid loans back on time and usually paying your bills on time, you can get a loan with more favorable terms than if you had poor credit. If you have poor credit, you may have to make a larger down payment or pay a higher interest rate for your loan.
When buying a car, you should always shop around for financing beforehand. Getting pre-approval for an auto loan ahead of time will let you know how much car you can afford and give you bargaining leverage at the dealership.
