A car loan is a special type of personal loan, which allows you to spread the cost of a car over an extended period of time, rather than paying the entire sum all at once. In return for this loan, you must pay interest to the bank or building society from which you have borrowed the money, which means that the total amount you repay will be greater than the amount borrowed. Generally, you pay back a small percentage of the loan each month, plus the interest charge: this is referred to as your monthly repayment.
There are two basic types of car loan: secured and unsecured. A secured car loan provides the lender with a specified item of security; in the event that you are unable to repay the debt, the lender has the right to take possession of this item, which in the case of a secured car loan is usually your car itself. An unsecured loan does not require you to provide an item of security, but as a result, this type of loan usually costs you more.
For further information see: