What is a car loan?

@tess.kassulke 

A car loan is a type of loan provided by a financial institution or lender to individuals who want to purchase a vehicle. It is a form of borrowing money to finance the purchase of a car, where the borrower agrees to repay the loan amount over a specific period of time, usually with interest. The borrower typically uses the car they are purchasing as collateral for the loan. Car loans can have varying terms and interest rates, depending on the lender and the borrower's creditworthiness.

@tess.kassulke 

When a person takes out a car loan, they receive the funds necessary to buy a vehicle, and they agree to make regular monthly payments to repay the loan amount plus interest. The loan term can range from a few years to several years, and the interest rate may be fixed or variable. The interest rate and loan terms can be influenced by factors such as the borrower's credit score, income, and the value of the car being financed.

Car loans are commonly used when individuals do not have the full amount of money needed to purchase a car upfront. By spreading the cost of the vehicle over time, borrowers can make affordable monthly payments while still being able to use and benefit from the car. Once the loan is fully repaid, the borrower owns the vehicle outright. If the borrower fails to repay the loan as agreed, the lender may repossess the vehicle to recoup their losses.