Should You Shop For a Loan Online?

keyboard Should You Shop For a Loan Online? Image courtesy of espensorvik http://www.flickr.com/photos/28478778@N05/5729009434/

When it comes to buying a new car or truck, most people do not realize that they have a lot of lenders just waiting to help you out.  There are so many options to consider that many people do not honestly know where to start.  A good place to start looking for an auto loan is actually the Internet, and there are many good reasons to skip local lenders as a first stop and head right to the web.  Here are some fabulous reasons why shopping for an auto loan online is the best way to start:

Supply & Demand

Simple economics tells us that when supply increases and demand remains unchanged there is but one result: better price points.  This means that the number one reason to get a loan online is to ensure that you get the best rates available.  The difference between a percentage point here or there may seem academic, but they make a very significant difference when looking at how much you will spend over the entire length of the loan.  When measured over years, the difference can actually be quite eye opening.

Take a 4 year loan for $10,000 for example at 10 percent versus a similar loan at 9%.  At 10 percent the monthly payment is $253.63 while at 9 percent that payment is $248.85.  You might be thinking that $4.78 a month is no big deal, and when viewed that way perhaps you are right. On the other hand, the difference measured over the life of the loan is $229.44, or almost an entire car payment!  If someone offered to make a single payment on your auto loan for free would you let them?  That’s the difference that even a single percent can make!

Better Chance at Acceptance

In today’s economy it is harder than ever to secure a loan, and thus those looking for an auto loan would do well to shop as many lenders as possible to get the best possible chance at being accepted.  Many lenders used to have special departments that worked primarily with securing auto loans for those with troubled credit or little credit history, but those days are gone.  There are still special lenders out there that focus on these types of consumers, but they tend to no longer be linked with major lenders like they were in days gone by.  This means that savvy consumers will have to shop the right kind of lenders based on not only their credit but also based on the current economy.

Whether or not major lenders dip back into the riskier end of the pool remains to be seen.  Given the fallout for lenders bundling different types of loans together and selling riskier loans hidden amongst conservative loans it seems unlikely that this will happen any time soon.

Don’t Take a Credit Hit

Shopping around at different lenders used to generate multiple inquiries, and that in turn could be a warning sign to other lenders.  The result was that those that were qualified were usually well advised to jump on the first loan that they could find as they were concerned that too many inquiries in too short a period of time would result in a negative impact on a credit score regardless of whether or not they even accepted the terms of a loan and put ink to paper.

Doing all your shopping online means one single credit hit that can be verified and passed on to literally hundreds of lenders.  Imagine the effect of having hundreds of credit hits on a credit report!  This makes shopping online for an auto loan literally hundreds of times smarter than shopping the traditional way or letting a car salesperson get a bonus on top of their commission by referring you to their own personal loan officer at a local bank.

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