Researching and Applying for Bank Auto Loans

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Even with poor credit.

November 9, 2016

Researching bank car loans takes more time than going along with dealer financing, but there are numerous advantages. Learn to evaluate a bank car loan.

As one alternative to financing a vehicle on the dealer's lot, consumers routinely go to banks to take out bank auto loans. However, a worsening economy can lead to less generous lending and less banks willing to take on a risk from auto loan customers. Researching bank auto loans is very important in order to avoid wasting time applying for the wrong kind of loan, or one that you will not be eligible for.

First Get a Copy of Your Credit Score
One of the first things to do is to check your credit score, fix any potential problems and go to your bank with as clean a credit record as possible. It also helps to build good credit when possible to become more eligible for auto loans in the future.

Check Online Lender Auto Loan Rates before Contacting the Bank
You'll be shocked at just how much fluff a bank will add to an auto loan rate just because the consumer is unaware of the rates that are actually available from online lenders. By getting informed about the reality of bank car loan rates at large, you'll be able to set banks straight about their competition's lower interest and their pricey car loan numbers.

There are many online lenders ready to offer "Bad Credit Loans" at slightly higher, but still do-able APRs. If the banks want your business, they'll need to compete for it.

Seeing What the Banks Have to Offer

Ask about the bank's involvement in the auto loan process: At any given time, some banks will be in the business of giving auto loans, and some will not. Whereas in past days, most banks routinely gave auto loans, the lending practice for many kinds of personal loans has since been curtailed.

Get the bank's range of interest rates: Bank representatives may not be able to tell you the exact interest rates that they would place on a loan prior to application, but they can give you a useful estimate.

Ask if your bank has a blank check auto loan policy: Some banks can give out auto loans without knowing up front what vehicle will be purchased. These are sometimes called blank check auto loans; any consumer can use them when visiting multiple dealers' lots. But other banks may require the year, make, model and even the VIN (vehicle identification number) for a vehicle.

Question the interest rates. If the interest rates seem high, ask your bank why. They may be able to explain specific considerations that caused them to give unusually high interest rates.

Check Out Several Banks and Compare the Loans

Many will choose one of the bank auto loans that they find and assume that it is the best they can find. They fail to adequately search for better bank loans. Comparing bank auto loans is the only way to make sure that you are getting the most out of your financial investment.

There are a few key points to compare when looking for the best auto bank loan:

  • Interest rates. The interest rate is basically the amount that you must pay the bank for giving you the loan. The lower the interest rate, the less the loan will cost you. It is a basic equation that will show you the cheapest bank loan choice
  • Length of payment. Some people are looking to pay their bank auto loan as fast as possible. Others are looking for a longer payment timeline to allow them for more financial flexibility. Researching and comparing bank auto loans will show you the lenders that meet your time requirement needs
  • Required money down. Some bank auto loans will allow you to have the auto loan without any money down. Others will require a specific amount of money down. Comparing these bank loan options will show you exactly how much you need to have upfront for that specific loan
  • Possible penalties. No one actually plans on paying their monthly payments late, or missing a monthly payment. Knowing what will happen to you if you do miss a payment is important. Compare each company to know what to expect from each company

When You Don't Have Good Credit

Having less than stellar credit won't necessarily prevent you from getting a loan. Ways to get around the issue of credit are to:

  • Provide collateral. While many borrowers just rely on home equity, your collateral doesn't have to be real estate. Money tied up in long-term investments may sometimes do the trick. The important thing is to show all of the collateral possible for a better chance at approval
  • Explain mitigating factors to lenders. Talking about some unfortunate credit conditions may help you secure an otherwise unapproved loan. For example, in the case of a "no-credit" loan, where a consumer has not previously borrowed, "informal" credit items like rent and utility payments may help
  • Fix a "no-credit" situation. The alternative to explaining away a lack of formal credit or even a bad credit score is to build good credit prior to applying for a loan. One of the most common ways to do this is to use a credit card or other continuous loan "on the record" and pay off balances promptly for several months
  • Proof of steady income. Proof of a steady income will be a huge boost to your auto loan chances. Having proof of an income that supports your loan goals will show the bank that you have the money to pay the loan, which removes some of the risk of giving you the loan. It can be as simple as bringing a series of pay stubs into the bank, perhaps along with some proof of how long you've held the position

See What Unique Benefits the Banks Offer

Banks in general, or certain specific banks, may provide unique benefits, services and tools to make the loan process easier for you.

These can include:

  • Better rates. Banks that you already have an established relationship with are likely to offer you better rates than other banks, because they want to keep your business. If they can gain more loyalty from you with a lower rate, chances are higher that you will go to them again for your future loan needs. Give your bank a call and see what kind of rates they can offer
  • Extra benefits. Getting an auto loan through a bank may come with many added benefits and features. You can set up payments to be deducted automatically from your checking account with no fee most often if you go through a bank
  • Personalized service. You will want to find a bank that offers personalized service. It's nice to be able to call and talk to a live person who can establish a relationship with you rather than an automated system. Many banks will assign a personal banker to your account. Even if they don't, you can still establish a relationship with the staff at a local branch. This may sound like a small thing, but it can make the experience much easier if you ever encounter a problem and need to find a solution

High Down Payment and Extended Payment Period Options
New vehicle loans offered by banks may offer a low monthly scheme, but could come with two considerations that are worthy of attention. These are:

  • High down payment. Low monthly plans could ask for a high down payment on your part, sometimes up to 40 to 50% of the total asking price
  • Extended payment period. Most plans could come with 60 or 72 month payment terms and would result to paying for a vehicle that is almost past the estimated useful life in terms of depreciation

With all the options offered by banks and credit unions for the smart car shopper, finding a proper car is made easy and affordable even in these challenging times. Take time to consult and compare various plans offered online before making the decision. An informed buyer will always end up with a great deal when it comes to a car purchase.

Vehicle Refinancing for Used Vehicles
Bank auto loans also offer attractive refinancing schemes even for used vehicles. This service is offered to consumers with a need to adjust present car loan payments to further stretch the budget. Present car owners who seem to suffer financially due to high interest rates from a current financing scheme will be happy to know that low rate auto loans are offered online. This will make it easy to determine and compare current refinancing packages offered by banks that may compose of lower interest rates to cure an ailing budget. Banks offer refinancing options for used cars that fall in two categories:

  • Used cars that are not more than five years old
  • Used cars with a total mileage not exceeding 100,000 miles

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