Part of getting a good car loan is choosing a lender, and when you're looking at bank auto loans and other alternatives, such as borrowing from a local dealership, or using connections with a credit union or other third party lender, it helps to know a little bit about how a bank loan approval can play a role in your next vehicle financing agreement. Here are some of what's good and bad about a loan process that goes through your typical bank compared to all of the other options at your disposal. From various lenders interested in loaning you money for a car or truck.
Pros
- Established Lenders - Banks are among the most established lending parties around. They are not likely to pull some of the tricks that ‘cheap money shops’ and other third parties sometimes engage in. Customers can often profit from selecting lenders with integrity, a good reputation, and a large cash flow.
- Additional Services - In addition to a bank car loan, banks can also help with mortgages and other forms of loans. Some banks can apply a home equity loan or home equity line of credit (HELOC) to an auto loan. Making your bank a one-stop shop can be a way to streamline different types of borrowing including car finance.
- Pre-approval - Some banks will also allow you to get pre-approved for a car loan. In order to come onto the dealer’s lot with confidence and know what kind of car you can afford before talking to a representative. For some buyers who might not completely trust their local dealership, or those who just want a clearer picture of their eligibility for financing, this option can be helpful.
Cons
- Less Favorable Rates for ‘Unconventional’ Bank Loans - Some banks say they are “not in the business” of doing auto loans or other personal loans. They will grudgingly offer you an auto loan that may be accompanied by generally higher or uncompetitive interest rates. These are not really the best lenders for financing a vehicle. If they’re not interested in making a deal for your money, find someone else who is.
- Skipping Preferred Customer Status - If a particular bank does not know you or have a financial history with you, you won't get some of the preferred status that you might enjoy from another lender. Say, the dealer you bought your last car from, or a local credit union connected to your employer.
- Third-party Loans and Dealer's Lot Financing - Since a bank will provide outside financing for getting your next vehicle, communications with this outside party may be less convenient than going through your local dealership. For that reason, some customers like to skip the outside process and just figure up their financing on the dealer's lot. It all depends on what kind of deals you can get from third-party lenders compared to what your dealership will offer you.
The above shows both some of the biggest merits and some of the most common drawbacks of using a bank for financing a car or truck purchase.