Banks or Dealers: How to Choose Your Best Auto Loan

Get Car Financing
Even with poor credit.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - February 12, 2019

There are so many auto loan options to choose from these days: banks, credit unions, captive lenders, independent loan companies – how do you choose? No matter what your credit situation is, car loans aren't one size fits all. To find the best auto loan for your situation, make sure you weigh all options carefully.

Determining Your Car Loan Options

Before you even begin to look for auto financing, you need to make sure you know what your credit situation looks like. Check your credit score and what's on your credit reports. This way, you're not going into a lending situation blind and allowing the lender to determine your credit position.

Once you know where your credit stands, you need to know what options are available to you. Let's take a look at the different ones that exist for car loans:

Direct Lending: Direct loans typically come from a bank or credit union, but could also come from an independent loan company. If you qualify with these lenders, they give you a pre-approval that you can take to the dealership when you go car shopping.

  • Banks – A trip to the bank is probably the first thing most people think about when getting a loan. Banks don't loan to just anyone, however, which can make things difficult if your credit has suffered some setbacks. Typically, they reserve their loans for people with the best credit.
  • Credit Unions – Credit unions can be a little easier to get an auto loan from, even if your credit's not perfect. This is especially true for members in good standing. Credit unions offer loan options, and are typically able to extend customers good rates because they're non-profit organizations.

Indirect Lending: This is the type of lending you get through a dealership, and they use indirect lenders to get you approved for financing. You don't sit down face to face with the lender, but work through the dealership’s finance department. An indirect lender can be a captive lender for a specific brand, or banks and other independent lenders that finance many vehicle brands.

  • Traditional Lenders – When you have decent credit and go through a dealership, one of their traditional lenders may be able to approve you for financing without much hassle. As long as you meet their income requirements and have good credit, there shouldn't be much standing in your way.
  • Subprime Lenders – These lenders are equipped to deal with bad credit car buyers, but they only work through special finance dealerships. When you have poor credit, your best option is typically to use a subprime lender because they look beyond credit scores and use other factors to determine if you're eligible for financing.

Which Type of Lender to Choose

In order to choose the lender that's the best fit for your situation, you should consider your credit score, your budget, and the type of vehicle you're looking for. Your credit is a big part of determining your interest rate and the type of lender you can work with. Not all lenders work with people who have bad credit, and if you decide to try your luck by applying for financing through your bank or credit union and are turned down, you can try finding a subprime lender to work with.

But subprime lenders only work indirectly through special finance dealerships, so where do you find them?

With a Little Help from CarsDirect

There are actually special finance dealerships all across the country, but many don't advertise the fact that they can work with bad credit borrowers. Here at CarsDirect, we have a relationship with many of these dealers, and can help you find one in your area. With our help, you don't have to drive from dealership to dealership hoping they have a lender you can work with. Our process is simple, free, and doesn’t put you under any obligation. To get connected to a local dealer near you for the bad credit auto loan you need, just fill out our car loan request form and we'll get to work for you!

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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