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Auto loan

An auto loan is a loan used to finance the purchase of an automobile and usually backed by a lien on the vehicle.

Expanded Definition

Auto loans may usually be obtained from your bank or credit union or from the auto dealer selling the vehicle. Your credit union will usually offer the lowest interest rate.

The interest paid on an auto loan is no longer deductible on your federal income tax return. For this reason, many now get home equity loans instead to finance the purchase of autos. This results in paying the lower interest rate of a second mortgage and makes the interest payments tax deductible.

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