Consumers can apply for a car loan from several lending
sources. The major sources of car loans are banks/credit unions, dealer financing, and private lenders.
Banks/Credit Unions
Most banks and credit unions offer car loans to their
members. You may be able to obtain a lower interest rate on your car loan depending
on your banking history and credit report.
- Benefits - Studies show that most banks/credit unions offer the best car loan rates.
- Drawbacks - Banks and credit unions offer very strict lending guidelines and generally
only deal with consumers that have excellent credit.
Dealer Financing
Most car dealerships offer car loans. The car dealer generally
works with many lenders. All these lenders when you apply for auto loans will
examine your credit report and make the car dealer an offer.
- Benefits - Dealer financing is the easiest way to get and requires the least amount
of work.
- Drawbacks - The car dealer is most concerned with providing financing in order to
complete a sale. This could result in giving the consumer a high interest
rate. A consumer should be aware of prevailing interest rates and terms
when getting car financing from a dealer.
Private Lender
There are a variety of private lenders that consumers can utilize.
Some lenders offer to process your loan application online for convenience,
while others will assist you over the phone.
Consumers can also use online
lender marketplaces that will submit your credit report to many lenders and get
you a competitive financing rate.
- Benefits - Private lenders offer a great amount of flexibility and let you to shop
around for the best finance rate before trying to buy a car.
- Drawbacks - Shopping for competitive rates needs a little more homework. Some
lenders may require a higher credit score to be eligible for their
program.
Weigh all your financing
options carefully prior to committing to a car loan. Ensure that you will be
able to make the monthly payments; or else, you may be getting into a car loan
that you cannot afford which will result in credit problems or even
repossession.
Your credit may severely get damaged due to repossession and can
prevent you from receiving financing in the future.
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