Car Loan

Car Loan is the second most commonly used loan after Credit Cards & Mortgage/Home Loans. Banks and Financial Institutes love this loan because consumers often can’t stop their temptation to buy a new car.

Definition: Car Loan -

- Car Loan is a type of Auto Loan. Auto Loan is a more broad term. Car Loan means a personal loan to purchase a Car.

- There is another entirely different variety of Car Loan also known as a ‘Car Title Loan’. A short-term loan in which the borrower's car title is used as collateral. The borrower must be the lien holder (i.e. own the car outright).The borrower must be the lien holder (i.e. own the car outright). Loans are usually for less than 30 days. If the loan is not repaid, the lender can take ownership of the car and sell it to recoup the loan amount. These loans are also known as "auto title loans" or just "title loans".

Explanation: -

Car Loans are Auto Loans which are used to finance the purchase of a New Car.

While Car Title Loans are the loans in which the borrower already has a Car. But he/she puts this Car as a collateral and borrow the money. These loans are for short time period. Means less than 30 days.

Car title loan lenders often target those with low incomes and bad credit and charge high interest rates; those with access to credit cards or bank loans would not be the target customers. Car title or auto title lenders are sometimes called "predatory lenders" because of the way in which they prey on those who need cash in emergency situations.

Although lenders must state the interest rate at the time the loan is made, if it is a short-term loan, the borrower may not realize that the quoted rate is not annualized. For example, if a one-month loan rate is advertised at 25%, that annualized rate is actually 300%.

In short, Car Title loans are the traps. They are nothing but the ultra-high interest rate loans. Lenders give these loans to people with a low Financial IQ and a bad credit history.