So you wish to finance your car but isn’t sure whether you should do that at the bank/credit union or at the dealership? Well, by the time you’re done reading this article, you should be able to make a decision as to which type of financing to go for.
Like it or not, we all cannot afford to buy our dream or desired cars from our savings. That is why there are financing options available for borrowers to take advantage of to finance their car. But even with that, it comes with some pros and cons that must be looked at before deciding on which option to go for.
One may think this question, “is it better to get a car loan through your bank or the dealership?” requires just a yes or no response. However, I cannot possibly tell you right away which financing option is better although I pretty much know which is better. You need to read along and understand both of these financing options so you can choose what works best for you.
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Car Loan At The Bank
Getting a car loan through your bank is I think the most commonest way of financing your car. Because you probably already have a relationship with your bank, it is a bit easier to speak to them about financing your car.
Most of these lenders offer preapproval before you even go to the dealership hence giving you an upper hand when negotiating at the dealership. Getting a car through your bank is usually less costly as compared to that of the dealership. The interest rates and APR offered by Banks/ Credit unions are usually lower than the dealership.
With this type of financing, you also get to do some comparing of offers of two or more lenders before settling on one that us best for you. However, borrowers should also note that most of these lenders usually have certain restrictions on the type of vehicles they do not finance and rates they give you takes into consideration the type of vehicle as well.
But in all these, your credit score is very key when seeking financing through your bank. As part of the requirements a borrower must meet before qualifying for a car loan, you must also have a good credit score. It is one of the most important things banks look out for when considering loan applications.
Hence if you wish to finance your car through your bank, then its best you have a good credit score before applying. This is so because a good credit score gets you lower interest rates and qualifies you for a larger loan as compared to when you apply with a not so good credit which comes with higher rates if you get approval.
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Car Loan At The Dealership
You can also choose to finance your car directly at the dealership which reduces the back and forth that comes with financing at the bank. With this type of financing, it is being offered in-house by the dealership themselves hence saves you time as you get to do everything at the dealership.
Dealership financing is sometimes offered by the dealerships themselves in order to increase sales and the process is faster as you are likely to get a response to your financing request faster than from the bank. They usually offer rebates and manufacturer deals to entice customers to easily choose them in financing their car.
However, interest rates at dealerships are normally higher than at the bank. They are also offered for a shorter term as compared to bank loans and usually requires some form of down payment before your request is approved. You can qualify for financing at the dealership with a not so good credit by applying with a cosigner but you also risk repossession if you fail to make payments.
As you must have observed in the earlier paragraphs, both of these financing options have their own pros and cons. However, the better option is to get a car loan through your bank rather than the dealership if you qualify.
This is because the positives of financing at the bank/credit union outweighs that of the dealership. Don’t get it wrong, financing at the dealership is also perfect and you can equally get a good deal as well. But always try getting your car loan through your bank to see if you qualify and what terms it will be offered to you before thinking of financing at the dealership.