A car loan is a personal loan for the special purpose of buying a new or second-hand car. It usually starts from 1 to 5 years. You can either make an initial deposit or leave a balloon(residual) amount to lower your repayment. By the end of the term, you need to pay off the balloon or choose to refinance this amount of money.

A car loan is usually a secured loan which means banks will repossess your car if you don’t make repayment. Interest rates are usually lower for secured loans compared with unsecured ones.

Variable rate and fixed rate are available for car loans. The interest rate is usually fixed, so you know exactly how much you must pay before the loan starts. If you wish to pay out your loan early, banks will charge a small amount of money called early termination fee for you.