Choosing a car loan
A car loan is a personal loan for the specific purpose of buying a new or used car.
You borrow an amount of money that you have to repay within a certain period of time (called 'the term'). You will have to sign a credit contract that specifies the amount borrowed and how you will repay it.
The term can vary, but is usually between 12 months and 5 years. If you don't pay off the full amount of the loan by the end of the term, or if you can't afford to make equal payments over the life of the loan, the final payment must be made as a lump sum. While this makes repayments affordable, you may be left with a large amount of money to pay off or refinance when the term ends.
With secured loans you offer an asset, such as the car you are buying, as security for the loan.
If you don't make repayments, the credit provider can repossess and sell your asset to get its money back. The age of your car will affect its resale value. If your car is sold for less than you owe, you will still have to pay the credit provider the difference.