What is an automobile loan?

An automobile loan refers specifically to the money borrowed to finance the purchase of a car. This type of loan is typically secured by the vehicle itself, meaning that if the borrower fails to repay the loan, the lender has the right to repossess the car.

This financial arrangement usually involves a fixed or variable interest rate and a repayment schedule ranging from a few years to several years, depending on the terms agreed upon. The loan allows individuals to afford a vehicle without needing to pay the entire purchase price upfront, making auto loans a common choice for consumers seeking transportation.

In contrast, the other options pertain to different financial products or purposes, such as mortgages for homes or grants that do not require repayment. Understanding the specific nature of an automobile loan helps individuals make informed decisions when considering financing options for vehicle purchases.