What is the Difference Between a Car Lien and a Car Loan?

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Finance terminology can be confusing, especially if you’re trying to get funding for that new or used car purchase. We can help clear it up. Use our guide to understand the difference between a lien and a loan and, when you’re ready to upgrade your Indianapolis or Zionsville commute, fill out our convenient online credit application and see how easy it is when you use Indy Car Financing.

Car Liens and Car Loans

Liens, loans, gaps, balloon payments; understanding these terms is important if you want to be protected when financing your next vehicle. Fortunately, the experts at Cars Direct and Stack Exchange make it simple to understand what those terms on your finance contract mean:

  • Loan: Your auto loan is simply the money you borrowed to pay for your new or used vehicle. The loan contract will have well-defined terms that explain your interest rate, payment schedule, additional fees, and any penalty that can be assessed as a result of non-payment.
  • Lien: A lien is the insurance policy that protects the lender against default. In an auto loan, a lien will be placed against the vehicle. If the buyer does not make the payments on the loan as agreed, the lien will give ownership to the lender. A lien will also determine the amount of money the lender will get should the buyer choose to sell the vehicle. For example, if you owe $10,000 on your vehicle and sell it for $12,000, the first $10,000 must be given to the lienholder to satisfy your debt.

Let Indy Car Financing Help

When you’re ready to get behind the wheel of a new or used vehicle, Indy Car Financing can help. We offer competitive rates regardless of credit thanks to our relationship with lenders nationwide. Discuss your needs with one of our knowledgeable credit counselors, review your budget, browse our partner inventory, and get the car you want at a payment you can afford today.

Learn More by Getting in Touch

Learn more about the loan products available to you through Indy Car Financing. Contact us now at (855) 468-6215 or stop by our Speedway Chevrolet location at 5252 38th Street in Indianapolis, IN to learn more.