Where to get an auto loan

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After you find your dream car, it’s important to consider where you can secure financing. Just as not all loans are created equal, not all lender types offer the same experience — benefits and drawbacks included.
Before starting your auto loan journey, weigh the best places to finance your car.
Auto dealership
One of the most seamless spots to secure vehicle financing is directly at the dealer. In-house financing mainly offers convenience: You can handle everything in one fell swoop.
Dealership auto loan pros
- Convenient. You can leave the car lot with everything handled in one place. It may be easier than dealing with a lender and dealer separately.
- Promotional financing. Dealerships sometimes offer special financing to sweeten the deal. This can save you money even with higher rates. You may need a high credit score to qualify, though.
Dealership auto loan cons
- Less competitive rates. Dealerships tend to carry higher rates as they are choosing the rates and can aim to make more money by increasing the rates offered.
- Harder to negotiate. If you only seek financing from the dealer, you won’t have as much room for negotiation. Getting preapproval from an outside lender gives you leverage to push for a lower rate.
Banks
Banks’ name recognition and history can be comforting to those looking for a familiar experience for their financing. This is especially true for those who have a longstanding relationship with a specific institution. When setting out to find a bank auto loan, pay close attention to requirements, as credit tends a bit more stringent.
Bank auto loan pros
- Larger loan amounts. Due to the larger financial backing that these organizations have, many times you are able to finance more. U.S. Bank, for example, offers loans for up to $100,000.
- Compeititve interest rates. Banks tend to offer some of the best interest rates if your credit score is good enough.
Bank auto loan cons
- Eligibility requirements. Typically, loans from banks carry more strict requirements such as credit score or debt-to-income ratio.
- Best service reserved for current customers. While current account holders can benefit from specialized services, those without an existing relationship may not be favored.
Credit unions
Much like a bank auto loan, financing your vehicle through a credit union provides you the reliability of a large institution coupled with personalized service. The non-profit membership structure of the lender also can mean more competitive rates for its members.
Credit union auto loan pros
- Customer service. As a member, you will have a different stake in the organization and be treated as such, a part of the community.
- User-friendly process. The structure also encourages a more personalized approach to funding, perfect for those with specific needs.
Credit union auto loan cons
- Membership requirement. To benefit from credit union offerings, you must be a member. This can range from a $5 deposit or a separate application.
- Less advanced technology. Unlike larger lenders, many smaller credit unions lack a built-out site with online chat. If you need support, you might have to pick up the phone.
Online lenders
If you want to avoid in-person interactions, getting your auto loan online lets you secure financing from the comfort of your home. Additionally, many online lenders offer competitive rates as money isn’t being spent for any brick-and-mortar locations to function.
Online auto loan pros
- Bad credit auto loans. With such a wide range of online lenders available, many cater specifically to those with poor credit — a score of around 580 or lower.
- Fast funding. The online process tends to mean much faster funding than competitors outside the web. If urgency is top of mind, consider this when comparing lenders.
Online auto loan cons
- Higher rates. The ease of a fully automated experience can also carry the downside of higher rates. The rates you see displayed on the website are not always accurate to what you qualify for.
- No in-person support. While most online lenders offer support over the phone, you won’t benefit from the assistance that in-person interaction can bring.
What’s the best place to get a car loan?
There is no best place to get a car loan for every borrower. Instead, you must consider what type of financial process you prefer.
If, for example, you don’t feel comfortable sharing personal information online, going with an online lender doesn’t make sense. Or if you have worked with a bank and have an established relationship, going in that direction can benefit you with competitive rates and personalized service.
Also, think about your credit history and how that influences your potential rates. If your credit is lacking, dealership financing is likely not the best place to start, whereas credit unions sometimes cater directly to poor-credit borrowers.
The main takeaway is to approach this choice with care and compare auto loans to walk away with the best loan for your needs. More than that, don’t be afraid to seek preapproval from multiple lenders. This way you won’t be pigeonholed to one lender and can choose the best deal.
The bottom line
Getting an auto loan is the less-thrilling first step in a vehicle purchase. To make the process less painful, consider your needs: your budget, finances and how you want the service to be handled. Then, you can decide if a dealership, bank, credit union or online lender will finance your next ride.
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