Although "direct lending" from banks and finance companies does occur, by far the most prevailing automobile loan program today is "dealership lending". In this situation, the buyer of the vehicle and the dealership enter into a contract for vehicle financing, and the dealership in turn (usually) assigns or sells this contract to a bank or finance company to service the loan. This program is profitable for the dealerships and offers one-stop shopping for buyers.

Clearly, going into the loan relationship the buyer / borrower needs to be aware of the interest rate and payment term. Although it may seem attractive to extend the term of the loan out to 60, 72 or even 84 months and lower the monthly payment, it can catch up to you. The toughest thing about auto loans is that it is very easy for the borrower to become "upside down" in their loan.

A borrower is "upside down" with their loan when the loan balance is higher than the vehicle's value. Although dealerships try to avoid this situation by lending only a % of the vehicle's value up-front, vehicles quickly depreciate (deteriorate in value) with time and use. The best way to avoid this situation is to pay down the debt as quickly as possible.

Regardless of your interest rate or loan structure, the best way to deal with your auto loans are to pay them off as quickly as possible. This is where a company called CuraDebt can help you - assisting you in creating a plan to get out from under your personal debt load. Click on the link below to obtain a free consultation today!

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