What is a Car Loan?
Car Loan is also known as Auto Loan, is a type of credit given to a purchaser to buy a vehicle. Usually, it is a 5-7 years medium-term contract. It is a secured loan because the asset or vehicle is pledged as collateral to the lender. Some financial institutions use the Hire Purchase Agreement, where the lender (the company that finances the goods) is the owner, and the hire purchaser is the hirer. During the period of the agreement, the hirer has possession and the right to use the asset. The ownership will be transferred to the hirer upon loan settlement. Borrower must pay the down payment on the purchase so that the loan can be approved by most financial institutions. Usually, the Interest Rate is fixed and the interest computation method adopted for Car Loan is Flat Rate Method. The repayment is payable in monthly basis by fixed payment amount.