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These loans are typically short-term, and tend to carry high interest rates. They are therefore used mostly by subprime borrowers with few alternatives.[1] In addition to verifying the borrower’s collateral, many lenders verify that the borrower is employed or has some other source of regular income. The lenders do not generally consider the borrower’s credit score. In this sense, title loans are broadly similar to the (typically unsecured) payday loans, and sometimes offered by the same non-bank lenders.

The maximum amount of the loan is determined by the collateral. Typical lenders will offer up to 50% of the car’s resale value, though some will go higher. The borrower must hold clear title to the car; this means that the car must not be collateral for any other loans (e.g. if it is financed).

The lender will take steps to ensure that if necessary, they can repossess the car. They might hold physical possession of the car throughout the term of the loan, or they might keep a duplicate set of keys. Other companies install GPS tracking devices; one describes a device that permits the lender to remotely disable and re-enable the car’s ignition[2].

Typical interest rates are around 300% (APR). The borrower might in some cases be required to make several payments of interest only during the term of the loan. At the end of the term of the loan, the full outstanding amount is typically due in a single balloon payment. If the borrower is unable to repay the loan at this time, then they can roll the balance over, and take out a new title loan. Government regulation often limits the total number of times that a borrower can roll the loan over, so that they do not remain perpetually in debt.

In jurisdictions with rate caps, a similar transaction is sometimes marketed as something other than a loan. One structure is a “sale-leaseback” between the borrower, who sells their car, and the lender, who buys it. The “interest” becomes a lease payment, and the “principal” is repaid when the borrower buys back their car. These structures have attracted regulatory attention; they are forbidden in several US states, including California.

(from Wikipedia)

A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan.

A mortgage loan is a very common type of debt instrument, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security - a lien on the title to the house - until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.

In some instances, a loan taken out to purchase a new or used car may be secured by the car, in much the same way as a mortgage is secured by housing. The duration of the loan period is considerably shorter - often corresponding to the useful life of the car. There are two types of auto loans, direct and indirect. A direct auto loan is where a bank gives the loan directly to a consumer. An indirect auto loan is where a car dealership acts as an intermediary between the bank or financial institution and the consumer.

A type of loan especially used in limited partnership agreements is the recourse note.

A stock hedge loan is a special type of securities lending whereby the stock of a borrower is hedged by the lender against loss, using options or other hedging strategies to reduce lender risk.[citation needed]

[edit] Unsecured

Unsecured loans are monetary loans that are not secured against the borrowers assets. These may be available from financial institutions under many different guises or marketing packages:

* credit card debt,
* personal loans,
* bank overdrafts
* credit facilities or lines of credit
* corporate bonds

The interest rates applicable to these different forms may vary depending on the lender, the borrower. These may or may not be regulated by law. In the United Kingdom, when applied to individuals, these may come under the Consumer Credit Act 1974.

When you compare car loans, these tips will help you keep your information straight.

Types of Car Loans
The best way to begin to compare auto loans is to familiarize yourself with the different types of auto loans out there. The first type of auto loan is a loan with a fixed interest rate. This means the interest rate does not change through the life of the loan. This is the most typical type of car loan. It is important to compare auto loan rates carefully when looking at fixed auto loans, because there can be fine print relating to the loans that can change the price.

Another type of car loan is a variable rate loan. This is the loan that has an interest rate that changes over the course of the loan. There is usually a range that is acceptable according to the terms of this type of loan. This rate could require your approval, or it could be up to the loan company alone.

Finally, an adjustable rate loan is another option for your car loans. This type of loan allows you to pay a lower rate at the beginning of the loan, and then have it go up to the agreed rate towards the end of the loan. This is a good option for those who are not planning on staying in their loan for the entire duration.

Looking At Your Options
Whether you are doing a used car loan comparison or a new car loan comparison, the basics are going to be the same. Comparing car loans from specific companies is one of the best ways to do your work. Remember to keep track of what you find, as it will be hard to remember. Write all of the information you receive down, and come back to look at it again before making your decision.

“I was floored when they started doing 72-month loans,” financial adviser Chris McAlpin said. “A rule of thumb that I like is pay for it outright. But I understand that not everybody can.”

As 2007 closes with about 16.1 million new-vehicle sales in the U.S., the lowest in nine years, the auto industry is grappling to push sales higher for 2008 and long-term loans can play a part.

Toyota cut back on incentive offers in late 2007 and began offering 84-month loans. Other automakers, including the Detroit 3, also offer long-term loans. But those loans, including Toyota’s, are reserved for customers with sparkling credit.

The idea behind long-term loans is buyers can afford vehicles through lower payments. But such loans, over time, can trap consumers into paying significantly more than sticker price.

For instance, a person financing $25,000 at 7 percent interest would pay $377 a month on a 84-year loan, compared to $599 for a 48-month-loan. However, the person with the extra payments ends up paying about $31,700 because of the added interest. A person with a 48-month loan would pay about $3,000 less.

Buyers who want a new car after three or four years can end up owing more than the car is worth, a situation known as being upside down.

In a summary of trends for the new year, analysts at automotive Web site Edmunds.com predicted consumers increasingly will find themselves upside down on their car loans.

Edmunds.com found, of those who bought new cars in 2007 and traded in a used vehicle, 25.6 percent had negative equity in their trade-in. The average amount upside down was $4,059, the highest negative equity average on record.

Buyers often fold the negative equity into a new-car loan, and can end up owing Lexus-level money on a Toyota or Lincoln dollars on a Ford.

“Most people spend their entire life with a car note. That’s not how to get ahead,” McAlpin said.

“I’d say 36 months max. Put money down, buy a car you can afford. Don’t get all the bells and whistles, get something that’s a good value, something that’s going to run a while.”

He suggested people let go of cars as status symbols and drive something practical and affordable.

Terry Jackson, automotive writer for Bankrate.com, observed long-term loans are double-edged swords for automakers.

“As car prices rise and buyers want vehicles with luxury appointments, the only way to make the deal attractive is to offer lower monthly payments. This is especially true in today’s marketplace, where new vehicles sales are spiraling downward. But lenders also know that the default rate on these longer loans is higher than on loans of 60 months or less,” he wrote in a Dec. 21 column.

Consumers, including those with great credit, can see their situations drastically change in seven years.

“Buyers can lose their jobs, get sick, get divorced or experience another life event that prevents them from making the loan payment,” Jackson said. “My advice? If you have to extend your car loan beyond five years and can’t afford to put at least 20 percent down, scale back your car desires to something you can afford.”

Several metro-Jackson dealers said they haven’t seen much demand for 72- and 84-month loans. Rather, their customers pay cash, lease or take incentive options.

Larry Cruise, president of Fowler Buick Pontiac GMC in Brandon, said 10 percent of customers lease, 60 to 70 percent cut a check, particularly for Buicks and GMCs.

“The other 20 to 30 percent are financing. But we’re really not seeing that (long-term financing.) When you can get zero percent at 60 months, it makes sense to go with that because you’re getting free money,” he said.

Shanehan Westphal, sales manager at Herrin-Gear Infiniti, said 40 percent of his customers lease, a good alternative to long-term loans when the buyer isn’t going to keep the car more than five years anyway.

“If you’re going to… finance it for five or six years and keep it for three, you’re going to be in debt. You put yourself in a difficult situation. If you lease for three years, you come back in three and toss us back the keys. Who’s the smarter person?” he asked.

He recalled a regular customer who sells high-end homes in Madison County. She puts on a lot of miles but gets a tailored lease allowing 45,000 miles a year for two years.

“She needs a higher-end vehicle when she’s selling homes at $350,000 and up. Had she financed the vehicle for 60 months it would be worth little with 225,000 miles. Yes, she’ll pay more on the lease payments but in two years, it’s not her responsibility,” he said.

“(Longer-term loans) are becoming more accepted than in the past. Probably 15 years ago, 48 months was a long time. The price of cars has gone up. But if you’re buying and keeping it for three years, you’re basically leasing anyway.”

Toyota Car Loans

The following table shows what type of service (and for what duration) is required in order to be eligible for a VA Loan:

Wartime Service during:

• WWII - 09/16/40 to 07/25/47
• Korean - 06/27/50 to 01/31/55
• Vietnam - 08/05/64 to 05/07/75
• Persian Gulf - 8/2/90 to undetermined

You must have at least 90 days on active duty. Plus, you must have been discharged under other than dishonorable conditions. If you served less than the standard 90 days, you may be eligible if discharged for a service connected disability.

Peacetime Service during periods:

• 07/26/47 to 06/26/50
• 02/01/55 to 08/04/64
• 05/08/75 to 08/01/90

To qualify for a Veteran Loan, you must have served at least 181 days of continuous active duty. Plus, you must have been discharged under other than dishonorable conditions. If you served less than the standard 181 days, you may be eligible if discharged for a service connected disability

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The Times recently reported on the growing length and risk of loans financed for automobiles by banks, credit unions, and the dealers themselves. The report raises several issues that all car buyers (regardless of whether they’re looking for new or used) should be aware of.

The average length of a car loan has increased to five years and four months as of October. Dwindling are the days of the three-year loan, as consumers look to finance more expensive automobiles that they would otherwise be unable to afford. Buyers are trading off large amounts of interest for a lower monthly payment. Some credit unions are even offering car loans for as long as eight and nine years.

What happens when one of these owners goes to buy a new car? Dealers often roll the debt from their last car into the loan for their next car. If this new loan must be financed over another five, six or seven years to make it affordable, you can see how this could be a problem.

With 45% of car loans written for longer than six years, this means car buyers are increasingly attempting to finance more and more debt over longer periods of time—time during which the product they’ve bought has plummeted in value. Today’s average car owner owes $4,221 more than the vehicle is worth by the time he or she sells it, up more than $500 from 2002.

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