Getting a car loan simply means borrowing money to pay for it. Borrowing 

money probably isn't new to you -- everyone's bummed $10 from friends. 

When you borrow from a lender, the amount you borrow is called the loan 

principle. Though the basic idea behind borrowing money for a car is the 

same, when it comes time to pay the loan back, things get a little complicated

Unless your friends don't like you much, they're not going to charge you 

interest on money you borrow. But professional lenders will. A bank isn't 

your friend and doesn't lend money out of the goodness of its heart. It 

needs a financial incentive. That's what interest provides for the lender: 

a financial incentive to lend money.When you take out a loan for a car, it'll come with an interest rate -- a certain percentage of a loan that you must pay back in addition to the 

original loan amount. So, if you borrow $20,000 for a car at a 5 percent 

interest rate, you're going to end up paying the bank $21,000 over the 

life of the loan -- that's the principle, plus the interest.