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Applying Online for an Auto Loan - The Advantages and Disadvantages
The internet has made just about everything easier and that includes getting an auto loan. As with any modern convenience, particularly when there's money involved, there are two sides to the coin. Here are the pros and cons to applying for an online loan.
Advantages:
Save time. Applying for a loan online is about as easy as it can get. You visit the lender's website, or one of those loan websites where they let you compare the offers of several different lenders, fill in the information required, and wait for their response. Done. It can take as little as a day to get the financing you need for your new or used car. You don't have to drive around from bank to bank to fill out their paperwork or take time out of your busy day.
You can apply for the loan when it is easiest for you. Apply for your loan during lunch, while you're watching the latest and greatest reality show, or anytime that is convenient for you. The internet is open 24/7 and so are the loan application websites.
You don't have numerous lenders accessing your credit report. Too many requests for your credit report can have a negative effect on your credit score. When you apply online, you only have one resource tapping into your credit information. You can get here.
You don't have to haggle with the dealer over the details of your loan. You have chosen the car you want, you've negotiated a price, and now you get to sit at the dealership and haggle over the loan details or worse, sit back and wait while they "discuss" your approval and your interest rate. Not fun. When you shop online for your auto loan, you eliminate this potentially dreadful experience.
You can walk into the dealership with cash in hand. Cash in hand saves you time at the dealership and it helps keep you on your budget. You know how much you have to spend because you already have the loan or the pre-approval. It takes some of the stress out of the auto purchasing process.
You can compare a number of deals at once. Many online lending websites enable you to compare several loan offers at once. This makes it easier for you to get the best interest rate and terms possible.
Disadvantages:
You may miss out on the better interest rates of local lenders. Many times, local lenders will have much better rates than online lenders and when you only look online, you may miss out on the opportunity to save hundreds of dollars.
Fewer fees. Many online lending programs have fees associated with applying.
There can be fewer fees with a local bank or credit union.
Your dealer may be offering an incentive that you can't match online.
Sometimes, dealers really do offer good incentives. Check out the incentives
being offered before you apply online for an auto loan to make sure you're
not missing out.
You could get a loan from a company that may go out of business. Online financial institutions go out of business. NetBank recently went under. They were absorbed by ING and NetBank customers were protected by the FDIC but it meant significant hassles for those customers. That isn't to say that your local bank couldn't go out of business but statistically there is less of a chance. If you do apply online for a loan, try to go with a well known lending institution.
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