What Is a Secured Car Loan?

Using a secured car loan is the most common way to purchase an automobile in today's market. Here are the basics of secured auto loans and how they work.

Secured Car Loans

A secured car loan is an arrangement that uses the automobile that you are purchasing as collateral. With a secured car loan, the lender gives you the money to buy a car. You purchase a car with the money, and then you start making payments to the lender.

If you make your payments on time for the duration of the loan, you will eventually pay it off. The car will then be yours to keep. If you do not make your payments on time, the lender will charge you a late fee. After a few missed payments, they will repossess the car. You will have lost your car, and your lender will report the incident on your credit report.

Common Terms

The majority of secured car loans have similar terms. For example, you will find that many of these loans are offered for a period of around 5 years. You will have a fixed interest rate as well as a fixed payment over the life of the loan in most cases.

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