A car loan is an agreement between the lender and you, the borrower, allowing you to borrow money for an agreed-upon term to purchase a vehicle. No extra collateral is required for availing of the loan, as the vehicle itself acts as collateral. Making timely repayments builds your credit history enhancing your credit score for future loan eligibility at a low-interest rate. Loan repayment helps you form a better idea of your spending capacity.