1. You choose the vehicle you want to buy.

2. The lender pays the seller (or gives you the funds).

3. You pay a down payment (your contribution).

4. You repay the remaining amount in monthly installments over an agreed period.

5. The vehicle itself usually serves as collateral — if you don’t repay, the lender can repossess it.

• • Principal – Amount borrowed

  • Interest – Cost of borrowing

  • Loan term – Usually 1–7 years

  • Down payment – Often 10–30% of the vehicle price

  • Monthly installment (EMI) – Fixed monthly payment

If a car costs $15,000:

• • • You pay $3,000 as down payment

    • The bank finances $12,000

    • You repay $12,000 + interest over, say, 4 years

• New car loan – For brand-new vehicles

• Used car loan – For second-hand vehicles (often higher interest)

• Motorcycle loan

• Commercial vehicle loan – For taxis, trucks, or business vehicles

• • Interest rates are usually lower than personal loans but higher than home loans

  • Insurance is often mandatory

  • Late payments can lead to repossession