Financing a car is usually handled through an auto dealership, but if you’re not sure that this is the option for you, it’s good to know that there are other alternatives. So if you’re about to go out and buy a car, now is the time to learn about how you can obtain car financing that works best for you.
The Dealership Loan
As previously mentioned, when you go out to buy a car, it’s most common that you secure financing through the dealership. This is because dealerships normally work with a number of finance companies, which offers you the convenience of choosing which auto loan is best for you.
However, there can be a number of issues associated with working with a dealership to obtain an auto loan. One is that the dealership and finance companies very often work together to offer auto interest rates that are too high while the borrowers are unaware of lower rates being offered elsewhere. Also, dealerships sometimes put clauses in finance contracts that allow them to raise the rate after you’ve already signed the paperwork. It is for these reasons that some borrows like to look at alternatives for financing a car.
The Bank Loan
An alternative that you can consider when you buy a car is the bank loan. If you choose this route to obtain an auto loan, you can give yourself a little bit more control over the financing process. Because independent banks have no vested interest in a specific dealership, you can finance at a fixed rate based on your credit score. Once you secure the loan (which can be done through local or online banks), you can take a check to a dealership and essentially purchase the vehicle (while still taking advantage of any rebates or incentives) – then, you will make monthly payments to the bank.
The Home Equity Loan
Another alternative to consider when financing a car is the home equity line of credit, which means you borrow against the paid up equity in your home. If you choose this loan route when you buy a car, you can usually take advantage of a lower interest rate because your home acts as security.
There is no perfect way to obtain an auto loan when you buy a car. But by reviewing your options, financing a car should be that much easier.