Best Options to Get an Auto Loan

Getting an auto loan has become relatively easy. From banks to dealerships, there are many places where you can get a loan customized to your capabilities and preferences. Considering the pros and cons of different lenders will help you assess the most suitable one. Below we’ve delved into different sources of auto loans like banks, credit unions, online lenders, and dealerships. Read on to know more.

Dealer Financing

There are three types of financing options to consider when approaching a dealership for an auto loan:

Dealer-Arranged Financing

Dealerships frequently collaborate with banks and other lending organizations. With dealer-arranged financing, the dealer serves as an intermediary between you and one of its lending partners. This is a very convenient method. However, you may end up paying a higher interest rate.

Captive Finance Companies

Many larger automakers, like Toyota Financial Services, GM Financial, and Ford Credit, have in-house financing departments. They may offer to finance both new and manufacturer-backed certified used cars. Captive finance companies offer promotional incentives but generally prefer borrowers with good credit.

“Buy-Here, Pay-Here” Financing

The dealership is also the lender in “buy-here, pay-here” financing. The dealership determines your eligibility for an auto loan. Your payments are also made directly to the dealer. If you struggle to get an auto loan because of bad credit, “buy-here, pay-here” financing is a great alternative.

Credit Unions

A credit union is a nonprofit company that shares earnings with its members by offering greater savings rates, cheaper fees, and lower interest rates on loans. Credit unions typically provide lower interest rates than banks. They’re a good option for people with poor credit.

Banks

When working with banks, you can be preapproved for several auto loans and compare interest rates to find the best deal. Banks may promote low or competitive interest rates but frequently reserve those deals for customers with “good” credit. Whether or not a bank lends you money also depends on the type of car you intend to purchase. Banks may refuse to finance vehicles over a certain mileage or age.

Online Lenders

With online lenders, you can sit in your home and easily evaluate various loan terms and interest rates. Like credit unions, online lenders are more open to working with borrowers who don’t have perfect credit scores. However, they offer steep interest rates.

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