Banks are direct auto lenders, and if you can be approved for a loan from these institutions, there are quite a few benefits. Having a lower credit score can make getting a direct loan tough, but you still have options if a bank doesn’t work out.
Direct Auto Lenders: Banks
Banks can offer many different types of direct loans, including mortgages and auto loans. In fact, banks are one of the most popular ways that borrowers get vehicle financing.
According to Experian’s State of the Automotive Finance Market in the third quarter of 2020, 25% of borrowers financed through a bank for a new vehicle. The remaining lenders include captive lenders (59%), credit unions (10%), and other lender companies (5%).
If a quarter of borrowers go to a bank for vehicle financing, they must have something going for them! Here are some benefits of financing a car through a bank:
- You can meet with the lender directly – Direct auto loans give you the ability to talk with the lender in person and develop a personal relationship with them. There’s also no middleman between you and the lender. If you’re a member of the bank you apply with, this could increase your chances of getting approved for vehicle financing, too. It also helps if your accounts are in good shape and/or if you're a repeat customer.
- Lower interest rates possible – Banks may be able to offer lower interest rates that are closer to the national prime rate. However, your credit score is still the biggest determining factor in what interest rate you can qualify for since your credit score places you in a tier.
- Banks are established – Banks are typically heavily regulated, established, and modern institutions. With a bank, there’s likely to be more security and peace of mind as well when you borrow, but you should still read through your loan contract thoroughly.
- They offer preapprovals – If you qualify for a car loan with a bank, you can get a check for your maximum loan amount and use it to buy a vehicle from most dealers or private sellers just like a cash buyer. This is also a good negotiation tool – a dealer may offer you a lower interest rate than the preapproval rate from the bank if you finance with them instead!
Preapproval from a bank offers you the flexibility to choose where you can shop for a vehicle. If there’s a bank in your local area, it could be as easy as gathering your check stubs and driver’s license and heading to the bank’s brick and mortar location to get a preapproval. However, not everyone qualifies for vehicle financing at a bank.
Can I Get a Direct Loan From a Bank?
The hard truth is that banks generally prefer borrowers with good credit, and they’re not known for having a lot of wiggle room.
Bad credit is usually defined as a credit score of around 660 or below. Even if you have a decent credit score, many direct auto lenders are wary of working with borrowers who have a vehicle repossession or bankruptcy on their credit reports. Though there are many benefits to financing a vehicle through a bank, borrowers who find themselves with tough credit circumstances typically have a better shot of getting a car loan with a subprime auto lender instead of a bank.
Bad Credit Car Buying Options
Subprime lenders are indirect auto loan financers, meaning you don’t meet with them like you would with a bank. Indirect lenders are often signed up with dealers, and you can apply directly through the finance department at the dealership. The finance manager works with you through the application process and lets you know if you’re approved for financing, and outlines what you can get based on what you qualify for.
Dealers that are signed up with subprime lenders are called special finance dealerships. These locations may be signed up with one or more subprime lenders, which could give you the chance to apply with multiple lenders with one visit.
Special finance dealerships can be a little tricky to find, but we’ve created an easier way to find the bad credit dealer you're looking for.
Finding Auto Loan Resources for Poor Credit
Not everyone qualifies for vehicle financing through a bank. If you can get a car loan through a direct lender, there are potential benefits, but a bank isn’t your only option when you need a car.
Here at Auto Credit Express, we want to make it easier and faster for you to find the lending resources you need to get an auto loan. With less than perfect credit, it can be a hassle to find a lender to work with – but we already know where the special finance dealerships in your area are.
Thanks to our expansive dealer network, we’ve been connecting bad credit borrowers to dealerships for over 20 years. Get started today by filling out our car loan request form. It’s completely free, carries no obligation, and we’ll get right to work finding a dealer in your local area that has bad credit lending options.