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Learn about car loans and their importance.
What is a Car Loan?
A car loan is a loan usually made by a bank to a an individual so that they can purchase a new or used vehicle. All car loans are bound by a specific period of time which makes this type of loan known as financing. These loans usually include a variety of fees and taxes that are added to the total loan amount.
Pros and Cons of a Car Loan
Some benefits of a car loan are that they generally come with a low interest rate. They are also easier to obtain with average credit history and serve as convenient financial solutions. Some disadvantages are that an upfront deposit is usually required and the owner does not have the title to the car until the final payment is made. The car serves as collateral for the loan, which means that if the owner fails to make the payments, the lender can take the vehicle.
Personal Loan vs. Car Loan
A car loan can strictly be used to purchase a vehicle, while a personal loan can be used for a variety of purposes, including the purchase of a vehicle. Personal loans can be unsecured, meaning the loan is free from collateral. Car loans are secured and vehicle itself serves as the collateral if the owner is unable to make payments. Also, personal loans generally require higher credit scores and generally have higher interest rates than those for car loans.
Quiz
Sources: https://www.investopedia.com/university/newcar/buying-new-car-financing-new-car-purchase.asp
https://www.investopedia.com/articles/personal-finance/070915/personal-loans-vs-car-loans-how-they-differ.asp
https://youtu.be/0X36AwfdNbE
https://quizlet.com/136741120
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