A car loan is money borrowed from a bank or financial institution to buy a new or used car. The loan amount is repaid in monthly installments over a fixed period, along with interest. The car you purchase serves as collateral for the loan, which means the lender can take possession of the car if you fail to repay the loan.
Car loans usually come with fixed interest rates, so your monthly payments remain the same throughout the loan term. The loan amount, interest rate, and repayment period depend on factors like your income, credit score, and the price of the car.
Before taking a car loan, it’s important to compare offers from different lenders to find the best interest rates and terms. Make sure the monthly installments fit your budget to avoid financial stress. A car loan is a convenient way to own a car without paying the full amount upfront, but careful planning ensures smooth repayment.