What is vehicle Loan 

Unless you and your spouse have enough cash lying around to pay for a car in full, you will likely use an auto loan to finance the purchase. A lender, such as an auto dealer or bank, provides money for you to buy an auto. You make monthly payments to repay the loan over time. The terms of an auto loan depend on various factors, including your income and credit history.

Interest Rate

The interest rate is the annual percentage cost a lender charges you to borrow money for an auto loan. For example, if you borrow $1,000 for one year with a 5 percent interest rate, you would pay $50 in interest. A lender typically quotes an interest rate as an annual percentage rate, or APR, which is the cost to borrow money including extra charges and fees. A borrower with good employment and credit history typically qualifies for a lower interest rate, which results in a lower payment.

Loan Payments

An auto loan’s monthly payment is typically fixed for the life of the loan. A lender applies a portion of each payment toward interest and a portion toward reducing the loan’s principal balance. As you make each payment, the portion that is applied to principal increases, which means you pay the loan down faster toward the end than toward the beginning. For example, $300 out of a $400 payment might go toward principal at the beginning of a loan, while $375 might go toward principal at the end.

 Financing Car Loan

Direct Lending. You might borrow money directly from a bank, finance company, or credit union. In your loan, you agree to pay the amount financed, plus a financecharge, over a period of time. Once you're ready to buy a car from a dealer, you use this loan to pay for the car