An auto loan is a type of financing that helps individuals purchase a vehicle. Borrowers receive a sum of money from a lender, which they agree to pay back over time, usually with interest. The vehicle itself often serves as collateral, meaning if the borrower fails to make payments, the lender can repossess the car. Auto loans can vary in terms, including the loan amount, interest rate, and repayment period. Factors such as the borrower's credit score and the age of the vehicle can influence these terms. Many lenders offer different options, making it important for borrowers to shop around for the best deal.