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Auto Loan
Definition
A secured loan used to purchase a vehicle, with the vehicle as collateral.
Explanation
Auto loans are secured loans where the vehicle is collateral. Terms range from 3-7 years with fixed interest rates. Rates vary based on credit score: excellent credit may get under 5%, subprime may face over 15%.
New cars generally qualify for lower rates than used cars. Shorter terms have higher payments but less total interest.
Example
Borrowing $30,000 at 6% over 60 months = $580/month payment. Total interest: $4,800.