An auto loan is a type of financing that allows individuals to borrow money to purchase a vehicle. The borrower agrees to repay the loan amount, plus interest, over a specified period, usually through monthly payments. The vehicle itself often serves as collateral, meaning the lender can repossess it if the borrower fails to make payments. Auto loans can vary in terms, including interest rates, loan duration, and down payment requirements. Lenders may consider factors like the borrower's credit score and income when determining eligibility and loan conditions. This financing option helps many people afford a car without paying the full price upfront.