Car loans themselves are just like any other loan. A  standard car loan likely has a moderate interest rate that is not as high as credit cards, and it covers the cost of the car. Interestingly, although dealerships plan on making money off their car loans, they are willing to offer lower interest rates because they are more interested in selling the car and making the profit than they are profiting off your debt.

However, if you have bad or no credit, that is when you need to be wary. Car dealerships that offer car loans to people with bad or no credit are, even when trustworthy, usually trying to take advantage of your need for a car (very few people shop for a car because they simply want one – usually it is badly needed). These agencies may, for their own safety, ask for an incredibly high interest rate that if you badly need a car you are likely to agree to.

And since car loans are essentially secured loans where your car is the collateral rather than your equity, these companies can repossess your car if you do not make the payments, making these high interest rates somewhat risky. If you have a home, you may want to consider getting a secured loan to cover the costs of your car if you have bad credit. If your credit is adequate, a standard car loan should be just fine for you.