Auto Loan

Banking & Credit

An auto loan finances a vehicle purchase, with the car serving as collateral. Standard terms run 36-84 months; current new-car rates average 6-9% for excellent credit, 12-20%+ for subprime. Used-car loans cost more. The 20/4/10 rule: 20% down, max 4-year term, payment under 10% of monthly income. Longer terms (72-84 months) lower payments but increase total interest and lead to being underwater (owing more than the car's value). Refinance your auto loan after 12 months of on-time payments — credit improvement often unlocks 2-4% rate reductions. Always finance through the credit union or bank before talking to the dealer.