Online approval for your car loan can save you time and help you find the best possible rate.
Financing gives you better negotiating power so you’ll be able to avoid the high rates and huge fees that can come with getting dealership loans. The online application process usually takes just a few minutes, and you’ll learn if you’ve been approved quickly.
Our guide takes you through the steps of applying for a car loan online and guides you in the right loan decision for you.
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How does online car loan approval work?
Being approved for a loan online is much like being approved for a loan when you visit the physical location of a lender. You fill out the necessary paperwork and wait to see if you’ve been approved.
If the lender agrees to finance your loan, it’s time to walk into a dealership and start negotiating for a car. You’ll already know how much you can borrow and the interest you’ll have to pay, so you won’t have to rely on the dealer to give you a good rate.
What do I need to know before I apply?
Before you apply, you’ll need to know how much you can borrow and what type of payment plan you can handle so you can prepare your finances for the cost of your new or used car.
Most lenders offer you a pre-approval that will last up to 30 days. This gives you time to search for a car and solidify your choice before committing to the loan and starting payments.
How to compare online car loans
Car loans are offered by banks, credit unions and independent lenders. With so many options on the market, it can be hard to know which one to choose or where you should start. Review these tips to help you find a loan that suits your individual needs.
- Application process. Some lenders have systems that can analyze your application quickly and provide an answer in very little time. Others might need to verify some of your information by phone or fax. Pick a lender that makes things easier for you.
- Down payment. The amount of your down payment can impact the rates a lender can give you as well as how long you need your loan to last. So the more the better. You can even use a trade-in car as part of a down payment.
- Total cost. The total cost of a loan is included as the APR. If you compare two loans for the same amount, interest rates and fees affect the total cost of the loan. Check the total cost when comparing your online car loan options.
- Documents needed. Will you need to fax a copy of your auto insurance or your driver’s license? Can these things be verified online, saving you time? These factors should help you determine which lender you’d prefer to go with.
- Dealership connections. If you’ve decided to go through a car loan connection service, research the dealers it partners with to make sure you’ve found a reputable source that you’re comfortable buying from.
Pros and cons of getting an auto loan online
- Quick decision. An online application takes just a few minutes, and you’ll know if you’ve been approved for a loan shortly after.
- Simplified negotiation. You won’t go into a dealership unsure of how much you can afford when you have an online loan. This makes negotiating the price simpler since you’ll know exactly how much you can pay for a car.
- Easy comparison. The best part of shopping is comparing your rates. With online applications, you can compare rates from multiple lenders with the click of a few buttons.
- May seem complicated. Being approved online adds an extra step to the already complicated process of buying a car, and it may not be worth it if you know your dealer has good financing.
- Not always the best rates. Depending on your credit, a lender may not offer you the best rates. Be open to seeing what type of financing your dealer has before settling on an online loan.
How to apply for an online car loan
Unlike the old days where each form was filled out and scanned individually by the lender’s underwriting team, online loans are fast and easy to complete. Every lender is different, but these are the basic steps you’ll need to follow when submitting a loan application:
- Browse the table above and find a lender that fits you.
- Click the Go to Site link to be redirected to the lender’s website.
- Fill out the application with your personal and financial information.
- Submit your application.
Most lenders will be able to tell you if you’ve been approved within a few minutes. You can view the interest rate and potential fees before you sign the loan contract. This makes it easy to compare loans.
Once you’ve decided on a loan, sign the necessary documents and submit. You’re ready to step into a dealership with financing to back you up.
Cautions to avoid before agreeing to the loan
The amount you qualify for doesn’t include the fees and taxes you’ll have to pay. For instance, if you’ve been approved for a car loan of $25,000, remember to search for a car that costs a few thousand less to cover any additional loan expenses.
Consider how much you’ll need to pay each month and whether your loan has traditional payments or balloon payments. A balloon loan has a short term where your payments mainly cover interest. At the end of the term, you’ll owe the remaining amount of the principal as one lump sum. It’s a repayment option that works for some people, but review your finances and ability to repay the loan before committing.
Finally, try to seek multiple lenders before choosing an offer. Comparing your rates is crucial when it comes to getting a good deal. You’ll want to know the fees and interest rates each loan carried before making a final decision, and this will help you finalize your decision.
Finding approval online doesn’t have to be a time-consuming process. With a few clicks, you could be well on your way to financing your next auto purchase. Before you do, compare multiple auto loan offers and read up on what you should expect.