Auto loans are a mid-length type of loan that is for the useful duration of the car. For most loans, this means from five to ten years, although it can be modified to almost any length. The average percentage rate (APR) of on this type of money purchasing deals is usually fairly small because of the length of the loan. The length of the loan means that the bank or credit union can reasonably rely on getting their money’s worth because of the contract that the consumer signs at the beginning of the deal. The contract says that you will make period installments, known as an annuity, in a consistent pattern for the duration of the loan.
The other facet of the auto loans that the banks enjoy is realization that an auto loan is a secured loan. A secured loan is one in which the bank as some form of collateral damage to mitigate their risk. Since their percentage rate of interest for the consumer to borrow the money is tied into a complex formula which measures risk, collateral damage mitigation is a good step in reducing the APR. Lower monthly payments for the borrower and a less stressful loan situation make the bank more comfortable with lending and more likely to do so.
Lastly, there is a decided difference in where you get the auto loans. The difference is where you begin the money lending process. If you work directly with a bank or credit union to work out a loan contract, then the loan you settle on is considered a direct auto loan. If, in the process of purchasing a car from a dealership, they offer to broker the deal with the bank or credit union, then the loan is called an indirect auto loan.