What Are Direct Auto Loans?
You can apply for an auto loan at a bank, credit union, or other lending companies. This is known as a direct auto loan. For this, you must submit documents such as proof of identity, proof of residence, and proof of income. These loans are processed directly from banks. Some lenders help you to save time and effort by checking if you pre-qualify for the loan. This can be done online.
Before purchasing a car, it’s beneficial to get a direct auto loan. This will help you recognize the amount you’ll be able to afford.
What Are Indirect Auto Loans?
Indirect auto loans refer to financing your auto loan through a dealer, lending partner, or any other financial institution. The process starts when you visit a dealer and select the car of your choice. The salesperson will then explain to you the pricing of the car. Once you’ve agreed to a certain amount, you must fill out an application form and submit all of your personal and financial documents.
In indirect auto loans, the dealership takes over as a middleman. To get your auto loan approved, they’ll run your credit with different lenders. If you want to buy the car from that dealership, then you’ll have to accept the interest rate that’s presented to you.
Differences Between Direct And Indirect Auto Financing
Below are some points where you’ll see visible differences between these two types of loan options:
- When do you get the loan: With a direct auto loan, you can get the loan before and after you’ve found the car you want to purchase. With an indirect auto loan, you’ll get the loan after you’ve found the car
- From where you can get the loan: Direct auto loans can be directly applied to through a bank, credit union, or any other lending company. For indirect auto financing, you must contact them through a dealership, their lending partners, or any other financing institution
- Credit enquiries: For direct auto loans, you can choose how many loans you want to apply for and get the best quote. With indirect auto financing, the dealer will run your credit several times
- Time spent: Finding the right lender for direct auto loans can be a time-consuming process. Indirect auto financing is quite fast since all the loans are searched at once
- Control level: You’re in full control of your credit score and research with direct auto loans. However, with indirect auto financing, the salesperson or the dealer has the control
How To Get Financed When You Have A Bad Credit Score?
Here’s the good news. You can now purchase a vehicle even with a bad credit score. Follow the steps below to get a loan with bad credit.
- Check what’s coming into your pocket every month, what your outgoings are, and how much you can pay towards your monthly payment after getting a loan. Research the costs involved in buying and running a car and then explore all the borrowing options
- You can get an annual report from a credit bureau such as Experian. A FICO over 700 is good for getting a car loan. If your report is between 600 and 700, then take some time to improve your credit score
- Researching several websites can give you much better options. Consider getting an auto loan provider online
- You can find a dealership that’ll offer better purchasing agreements even with a low credit score
- Always go through the terms and conditions of your loan. Don’t accept a deal that you won’t be able to manage
Bottom Line
Make sure to secure your finances first before selecting any type of auto loan, whether it's a direct or indirect auto loan. Understanding the terms for both types is crucial to your financial health. Get a clear idea of what you want and get the best loan that fits your needs.
