A car loan is a financial service used for the higher purchase of a car. A car loan allows you to hold on to more cash in hand while paying an interest over a period of time. The average car loan tenure in Malaysia can take up to 5, 7, or even 9 years

Loan providers include banks and sometimes the car manufacturers themselves. To apply for a car loan, you first set the amount of money that you would like to loan. You will then be required to submit relevant documents like your bank statements, pay slip, and credit score to see if you are eligible for the loan.

In a car loan agreement, the car serves as a collateral. That means if you default on the loan, the bank will take the car from you. If the bank perceives the car of lesser value than you do, the chances of loan approval might decrease since the car’s value will not be able to pay off the loan.

The maximum amount of loan on a car is usually 90% of its value. You would have to make a 10% down payment first. In the case of used cars, you might have to make a 20% down payment, so the loan amount can only be 80% of the car’s value at maximum.

Your monthly income will limit the amount of loan that will be approved by the bank.

A plus side of a car loan is that it enables you to have more cash in hand. The downside of a car loan is the interest rate that is charged. A plus side of paying a car in full is that no interest is charged. The downside is that you will have less cash in hand. It depends on your financial capabilities and needs.