Understanding Auto Loans

When it comes to purchasing a vehicle, most people don't have the funds to pay in cash. That's
where auto loans come in.

Types of Auto Loans

Auto loans come in different shapes and sizes, each with its own set of terms and conditions.
Here are some of the most common types of auto loans:
1. Direct Loans: This is the most basic type of auto loan, where the lender provides the funds directly to the borrower.
2. Indirect Loans: With an indirect loan, the dealership acts as an intermediary between the borrower and the lender.
3. Secured Loans: Secured loans are backed by collateral, usually the vehicle itself. In the event of a default, the lender can repossess the vehicle to recoup its losses.
4. Unsecured Loans: Unsecured loans don't require collateral, but they often come with higher interest rates and stricter repayment terms.
5. Balloon Loans: With a balloon loan, the borrower makes lower monthly payments throughout the term of the loan but must pay a lump sum at the end to pay off the
remaining balance.

Auto Refinancing

Auto refinancing can be an attractive option for borrowers who want to lower their monthly
payments or interest rates. Here's how it works:
1. Get a New Loan: The borrower applies for a new loan with a different lender.
2. Pay Off the Old Loan: The new loan pays off the original loan in full.
3. Make Payments on the New Loan: The borrower makes payments on the new loan
according to the terms of the new agreement.

What to Consider When Choosing an Auto Loan

Choosing the right auto loan can be daunting, but it's essential to get it right. Here are some
factors to consider when choosing an auto loan:
1. Interest Rates: The interest rate on an auto loan determines the total amount you'll pay
over the life of the loan. Lower interest rates mean lower overall costs.
2. Loan Term: The loan term is the length of time over which you'll repay the loan. Longer
terms mean lower monthly payments but higher overall costs.
3. Down Payment: A larger down payment reduces the amount you need to borrow,
resulting in lower monthly payments and less interest paid over the life of the loan.
4. Total Loan Amount: The total loan amount includes the purchase price of the vehicle
plus any additional fees and taxes. Be sure to factor in all costs when choosing a loan.

When to Refinance Your Auto Loan

Refinancing an auto loan isn't always the best option. Here are some situations where it might
make sense to refinance:
1. Lower Interest Rates: If interest rates have dropped since you took out your original loan,
refinancing can save you money on interest charges.
2. Better Credit Score: If your credit score has improved since you took out your original
loan, you may qualify for lower interest rates, making refinancing an attractive option.
3. Financial Hardship: If you're struggling to make your monthly payments, refinancing can
provide temporary relief by lowering your monthly payment.



Always think of LINCONE Federal Credit Union first before you purchase or finance a new or used vehicle. Auto loans can be an excellent way to finance the purchase of a vehicle. However, it's essential to choose the right loan and understand the terms and conditions of the agreement fully. With this information in mind, you can make an informed decision that meets your financial needs and goals. LINCONE works to ensure your next vehicle purchase is a pleasant and exciting experience.

We offer very competitive rates, extended warranties, Guaranteed Asset Protection (GAP), debt protection, and more at a much lower cost than the dealers. The credit union also has resources such as NADA (Blue) books to help you negotiate the value of your trade and the best possible price for the vehicle you want.

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