Is It a Good Idea To Get a Car Loan From a Bank?
Buying a pre-owned or new vehicle is exciting, but finding the right financing method can be confusing. Are you wondering if you should get a car loan from a credit union or a bank? Or are you considering financing through a dealership? All these options have different benefits. Read on to know more.
Financing Through a Bank
Financing through a bank means getting a preapproval and tentative budget before entering a dealership. Speak to a bank or credit union representative to start the process.
Some banks only offer services online, while others have physical offices. Banks that function online don’t have the overhead expenses of running local offices, so they can offer lower interest rates and better bargains.
Compare auto loans provided by different banking institutions. Bank and credit union rates often reflect current market circumstances and don’t include markup. A marked-up interest rate can substantially increase the total amount you end up paying over the course of a loan.
The initial quote you receive from a bank is not the final sum. Bank representatives will check your credit and examine the report to calculate a suitable interest rate.
Banks and credit unions charge varying interest rates for new and used vehicles. Starting the financing procedure before you choose an automobile will save you time and hassle because some lending companies impose mileage and age restrictions.
Financing at A Dealership
When you approach a dealership, a representative from the finance department will give you financing options. Dealers are connected to different lenders who supply them with quotes.
Reaching out to multiple lenders helps the borrower ensure they get competitive and fair rates. Sometimes, the dealership professionals will offer a higher interest rate than the lender has offered. Dealerships use the difference as compensation for facilitating the auto loan transaction.
If the dealership offers a high-interest rate, ask them for a lower rate or go through a bank or credit union instead. Dealerships are likely to reduce the interest rate if they feel they might lose the borrower to a financial institution.
However, financing through a dealership is a good option if you have poor credit or no credit history. Some dealers are known to work with people who have low credit scores by offering them second-chance financing.
