A secured auto loan is a common financial product used to fund the purchase of a vehicle. Unlike an unsecured personal loan, which relies solely on a borrower's creditworthiness, a secured loan is backed by the asset itself. This collateralization typically allows lenders to offer lower interest rates because the risk of total loss is mitigated by the ability to seize the car in the event of a default.

When a consumer takes out a secured auto loan, the lender usually holds a lien on the vehicle title. This legal status remains in effect until the loan balance, including interest and fees, is paid in full. Once the debt is satisfied, the lender releases the lien, and the borrower gains full, unencumbered ownership of the vehicle.

If a borrower stops making payments, the lender can initiate repossession. The specific timeline and legal requirements for this process vary significantly by jurisdiction. In many cases, the lender does not need a court order to take possession of the vehicle, provided they do not breach the peace during the process. After repossession, the vehicle is often sold at auction. If the sale price is less than the remaining loan balance, the borrower may still be responsible for the difference, known as a deficiency balance. Conversely, if the sale exceeds the debt, the surplus is generally returned to the borrower. Understanding these terms is essential for consumers, as the primary risk of a secured loan is the potential loss of the vehicle and continued financial liability even after the asset is gone.