A car loan is a type of financing that allows individuals to borrow money to purchase a vehicle. Typically offered by banks, credit unions, or dealerships, these loans require the borrower to repay the amount borrowed, plus interest, over a set period. The vehicle itself often serves as collateral, meaning if the borrower fails to make payments, the lender can repossess the car. When applying for a car loan, lenders consider factors such as the borrower's credit score, income, and the price of the vehicle. Interest rates can vary based on these factors, and borrowers should shop around to find the best terms.