So you want a new car. But do you have five figures to spend on one right now? Probably not. In order to get a new car, you’re going to need to get an auto loan. You’re also hoping to get a low interest rate. Where do you get an auto loan? You have four major options: banks, credit unions, dealerships, and finance companies. Here’s a little information on getting a loan from each.
One of the most obvious places to get a loan is, of course, a bank. A good place to start when shopping for a loan is to go into the local branch of the bank you belong to and speak with someone. They can tell you what current interest rates are and what you qualify for based on your credit. After that, you can visit competing banks in your area. Major banks usually list their current interest rates and allow you to apply for a loan online. It’s always advisable, however, to actually go into the bank and speak with someone in person. This will help you fully understand the loan and maybe even get a better deal.
Credit unions are an alternative to banks. They’re often small and local financial institutions. The difference between credit unions and banks is that credit unions are nonprofit, and as a member you would be a partial owner and have stake in the company rather than be just another customer. Credit unions usually offer very competitive rates, and you may get a better rate than you would at a bank. Research local credit unions in your area, and visit them to ask about becoming a member and getting an auto loan. You may prefer doing business with bankers who aren’t just looking for a profit.
For convenient one-stop shopping, you can get an auto loan from the dealership where you purchase your car. This is easy, but it’s not always the best idea. Dealerships can make more money from giving you a loan, so they often offer higher interests rates than banks or credit unions. You can, however, negotiate just as you did for the price of your car. But to avoid paying too much, don’t discuss financing until after you’ve agreed on a car price (don’t discuss them at the same time). Also, bring your preapprovals from other institutions and see if the dealership will meet, or even beat, your other offers.
If you can’t get a loan from a bank or a credit union, and if your dealership doesn’t give you one directly, you may get one from a finance company. Finance companies are independent organizations that can loan you money, and some are owned by auto manufacturers. Finance companies are usually willing to offer you a loan even with less-than-stellar credit. Because they’re willing to give people with lower credit a chance, they’ll often charge higher interest rates. You’ll usually pay more for a loan from a finance company compared to anywhere else.