Auto Loan
An installment loan used to finance the purchase of a vehicle, where the vehicle serves as collateral. If you fail to make payments, the lender can repossess the vehicle. Auto loan interest rates are partly determined by your credit score.
Related guides
- Full credit & FICO® glossary
Browse all defined terms by category.
- Installment Loan
A loan repaid in fixed monthly payments (installments) over a set period of time. Examples include mortgages, auto loans, student loans, and personal loans. Unlike revolving credit, installment loans have a fixed balance that decreases with each payment.
- Repossession
When a lender reclaims a financed asset (typically a vehicle) after the borrower defaults on loan payments. The lender then sells the asset to recover the debt. Repossession remains on your credit report for seven years and significantly damages your credit score.
Frequently Asked Questions About Auto Loan
What does Auto Loan mean?
An installment loan used to finance the purchase of a vehicle, where the vehicle serves as collateral. If you fail to make payments, the lender can repossess the vehicle. Auto loan interest rates are partly determined by your credit score.
Is Auto Loan important for my FICO® score?
Understanding Auto Loan helps you manage your credit profile more effectively, which in turn supports a stronger FICO® score.