Using an online car loan broker could be a quick, convenient way to find multiple loans to finance your next car purchase.
Applying for loans one at a time and comparing your results can be a stressful and slow process. A car loan broker can assist you with filling out applications and could help you find the best lender for your unique situation. Better yet, finding a broker online means you can start the financing process from the comfort of your home.
Our guide teaches you what a car loan broker does and helps you determine if this is the right course for you.
How do loan brokers differ from direct lenders?
A loan broker works with multiple direct lenders to find its clients a good deal. Brokers act as intermediaries between you and a lender so you won’t have to fill out multiple applications. They find loans from banks and other lenders that can meet your needs.
A direct lender will only offer you certain terms that vary depending on your credit, finances and the lender’s terms. You’ll have to apply with multiple lenders to compare your options, but with a loan broker, you can skip this step. Car loan brokers sift through the lenders for you so you don’t have to go to multiple direct lenders for quotes.
What are the benefits of using a car loan broker?
An online car loan broker can help you in a variety of ways.
- Protect your credit file. Every time a potential lender checks your credit, your credit report is negatively affected. Applying for multiple loans can really bring your score down. A broker confirms your credit once before sending your application on to actual lenders.
- Access a range of lenders. Going through a broker means you’ll be able to receive different loan offers from different lenders with one application.
- Save time. Instead of meeting with lenders, or filling out multiple applications, an online car loan broker allows you to apply once and receive offers electronically.
How do you choose an online car loan broker?
Choosing the right broker can help make the car-financing process smooth. Find out what sets these companies apart and what important information to look for before choosing one.
- Research potential brokers and their lenders. Before you commit to a broker and its affiliated lenders, you’ll want to know what sort of company you’re working with. A broker’s online reputation and ability to answer your questions will be important when you’re deciding which company to choose.
- Pick your broker based on its specialties. If you have bad credit, find an online car loan broker that can help you find a loan for your credit range. If you have a specific budget, find a broker that is skilled in negotiating with lenders. Whatever your needs, there is likely a broker out there that can meet your expectations.
- Ask questions. Never stay quiet during the loan process. You should ask questions of every broker you find and make sure you keep a list of the broker’s fees. Each service the broker offers may have a different fee, so you should request a full outline of charges to compare brokers.
Remember that an online car loan broker is quite impersonal. You may never go to a physical office to discuss your loan options, and much of your business may be conducted over the phone or online. If you like meeting a lender face-to-face and want personal interactions, an online broker may not be the right decision for you.
Getting all the right information is vital when deciding which broker you’re choosing. It’s OK to ask questions before agreeing to go with a car loan broker. Having a list of your loan requirements will go a long way in showing the broker what you’re looking for.
Are there any risks in using an online car loan broker?
There are two main risks with online car loan brokers.
The first risk, and easiest to avoid, is disreputable brokers. These are brokers that charge a fee but don’t do any work. Your broker shouldn’t ask for any fees upfront, and if it urges you to quickly sign papers or offers you loan documents with blank spaces, understand that you may be facing a predatory situation. Predatory lenders target borrowers who don’t have the best credit, and they take advantage of a borrower’s need for money.
Make sure the broker you choose is easy to contact and has appropriate state licensing. If you have any reason to doubt your broker, it’s OK to walk away — you’re never obligated to complete a loan process you’re not comfortable with.
The second risk is that even the most reputable broker may still not be connecting you with the best loans. Many are paid based on commissions from the direct lender. This means there’s a possibility of your broker choosing a lender that will approve your loan rather than sending your application to multiple lenders to get you the best deal. Find reviews of the lender’s services on websites like TrustPilot or Better Business Bureau and ask to speak with former clients to ensure your broker will do the most to get you good rates on your next car loan.
How do I apply for an online car loan broker?
There are a few easy steps to completing an application with a car loan broker and being connected with one or more lenders.
Get in touch with an online broker about your financing needs. Most brokers will have contact information or a quote form on their website. Once you fill out the basic information, the broker will follow up and ask questions about your financial situation, the car you’d like to buy and the loan terms you’re seeking. This information will be used to do a preliminary assessment of your options.
After cross checking your application against a lender’s criteria and confirming the type of vehicle you’re looking for, the broker recommends a loan product suited to your needs. If you agree to the proposed terms, the broker sends funds directly from the lender to the seller. At this point, you’ll can drive away in your new car.
What do you need to apply with a car loan broker?
Much like applying with a direct lender, you’ll need to submit a few pieces of information when working with a broker. Your driver’s license, insurance information and proof of residence are most common. You may need proof of your income and employment, and other personal information like your credit score and date of birth.
If you’ve already chosen your car and dealership, provide information about the seller and the car make and model. The further you are in the car-buying process, the better your chances of being approved by a lender.
What are the pros and cons of applying with an online car loan broker?
- Bad credit is accepted. Although many lenders tend to be wary of lending to customers with bad credit, you may have better luck with an online broker since your application is submitted to several different lenders at once.
- Possible discounts. Online brokers often conduct business with the same lenders, so chances are that they may be able to negotiate loan terms and get discounted interest rates for you.
- Less work for you. Besides helping you with the application, the online broker does all the work when it comes to shopping around for the best loan for your budget.
- Impersonal process.If you prefer face-to-face exchanges with lenders, then this solution isn’t for you. The broker submits your application to lenders on your behalf, and it’s possible you won’t ever meet with the broker.
- Additional fees. Brokers can charge brokerage fees and fees for setting up the loan. Research the broker’s fee schedule before committing to a contract.
Is there anything I should keep in mind?
Buying a new car can be exciting, but before you commit to a loan, keep these points in mind:
- Be realistic. A car is one of the bigger investments you’ll make. Go for a purchase that’s a good value for your money and that you can afford to maintain.
- Thoroughly check the car. Before signing any legal contracts, make sure that the car matches the seller’s description. Check the mileage, features and general condition.
- Don’t settle. You don’t have to sign or agree to anything if you don’t feel comfortable with the seller or broker’s recommendations.
Compare a range of car loan providers
When it comes to financing your next car purchase, an online car loan broker can be a great option if you want to avoid filling out multiple applications and waiting to hear back from each individual lender. Make sure to conduct a thorough check on the broker you choose, and don’t forget to compare your other car loan options.
Frequently asked questions about applying with car loan brokers
Image source: Shutterstock