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Can you explain how car loans work?

I want to buy a car, but I only have a few thousand saved up. My credit union told me I can get a car loan. How do car loans work?

avatar
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Don’t worry that you don’t know how
car loans
 work. Everyone has a learning curve!
The idea is actually very simple. Let’s say you want to buy a car for $20,000, but you don’t have the money. A lender, such as a bank, dealership, or credit union, will let you borrow the money. Then, you pay it back over an amount of time that you agree upon. This length is typically between 24 and 84 months.
In return for letting you borrow the money, the lender will charge an interest rate. That’s how they make their money on the deal. Because interest rates can vary, you will always want to shop around for car loans before you sign a deal.
When you enter into a car loan, the lender will also require you to have full coverage auto insurance. That’s when
Jerry
 can help you the most. Sign up with Jerry to compare rates for full coverage car insurance and get the best deal for your needs.
MORE:
New car insurance: What coverage do you need when buying a new car?
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