Direct Auto Loan or Indirect Auto loan. Which is The Best Loan to Choose?

A loan is an amount that banks or lenders lend to the borrowers in exchange for collateral and paying of interest rates. A car loan is a type of loan where the borrower takes the loan to purchase a car. It is also known as an automobile loan or auto loan.

Car loans come under personal loan but basically personal loan is an unsecured loan and car loan is a kind of secured loan, where the car itself will be put as a surety with the lender and upon non-payment of the loan amount, then the lender has rights to take the car and sell it to cover the debt amount. The lender lends the amount based on the value of the car. The borrower agrees to pay the whole loan amount including the interest rate on a monthly basis until the entire amount is paid off.

The lenders will check your credit score and the income status, to see if you can make the payment on time or not. The borrower’s credit report will give detailed information to the lender on his past loans and payment history, if the borrower has a bad credit score then few lenders consider it as ineligible and few lenders still offer the loan based on trustworthiness and by taking collateral as surety.

When you are looking for purchasing a car through loan then you can think of two ways for financing.

1. Direct auto loan: Direct loans are one that you get directly from a financial institution, credit union or any local finance company without any dealer involving in the whole process. With a direct auto loan, the borrower has to deal directly with the lender and finalize the financing before going to the dealer for purchasing the car. The car that the borrower is purchasing will be as collateral and the lender will partially own the car until he pays back the whole amount.

Advantages of a direct auto loan

The advantage that you get with this type of auto loan is

• You can compare different lenders even before buying the car.
• You will receive the loan amount first and then you can decide on what car you want to buy.
• With the amount of money, you have received through a loan, you can plan on the budget of the car and then negotiate with the dealer.

For example:- You go to a lender or a bank to get a loan so that you can purchase the car. The bank upon verifying everything will give you cash or cheque that can be used to purchase the car of your own choice.

2. Indirect auto loan: Indirect loan is referred to as dealership financing where you get the loan through the dealer from another financial institution. It is basically like, the borrower has to go to the dealer first, choose the car and then the dealers will work with different financial firms in order to help the borrower with the right type of loan according to your budget. It is like an agreement between the borrower and the lender and the dealer plays a middleman role.

Advantage of an indirect auto loan

The advantage that you get with this type of auto loan is

• You don’t have to run to different lenders and get a deal for your loan amount. Your dealer will help you out with getting all the information from different lenders.
• You can get the loan easily as the firms are already tied up with the car dealers.

So, the whole choice of choosing a direct or indirect loan depends on your convenience. Choose the best one and fulfill your dream of getting a car.