A car loan broker can help you find and apply for car loans, saving you time and money — or lending some expertise if you're new to the game. And since many brokers work online, you might not even need pants. But you'll still want to do your research to make sure you're working with someone you trust.
How do loan brokers differ from direct lenders?
A broker act as an intermediary between you and a lender so you don’t have to fill out multiple applications to compare your options. A direct lender funds the loan itself but typically requires a quick application before you can get a quote.
A broker can be useful if you want a good deal but don’t have the time to get quotes from multiple direct lenders. It Brokers work with multiple lenders to find its clients the best rates and terms they’re eligible for. They find loans from banks and other lenders that can meet your needs.
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. 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 I 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.
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.
What to expect when working with a broker
An online car loan broker is quite impersonal. You might 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: disreputable brokers and free online brokers that don’t have your financial interests in mind.
Disreputable brokers are brokers that charge a fee but don’t do any work. You can avoid them by looking out for these warning signs:
- Upfront fees. Your broker shouldn’t ask for any fees before providing the service.
- Rushes you through the paperwork. Stay away from brokers that urge you to quickly sign papers or offers you loan documents with blank spaces.
- Hard to reach. Most reputable brokers list a phone number or at least have a mailing and email address listed on their website.
- Isn’t licensed. Make sure that your broker is acting within the law by having a state license if it’s required — you can check with your state’s department of business oversight, attorney general or the CFPB.
Free online brokers
If your broker isn’t charging you anything for the service, it’s a sign that they’re getting paid per client they send to a lender. This is particularly common with online lenders and isn’t necessarily a sign that you won’t get a good deal. But you because these brokers make money from their lenders, your interests might not be as important as keeping the lender happy.
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 auto loan broker online?
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. Most brokers have contact information or a quote form on their website.
- Tell the broker about your specific needs. Brokers typically 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.
- Wait for the broker to cross-check your application. Many online brokers can use algorithms to quickly find quotes on car loans that you can qualify for.
- Review your options. If you have any questions, you can ask your broker for clarification.
- Agree to the terms.
- Drive away in your new car. After you sign your loan documents, the broker sends funds directly from the lender to the seller. At this point, you can pick up your car
What do I 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.
Pros and cons of applying with an auto loan broker
- Bad credit is accepted. Bad credit borrowers might have better luck finding a lender through an online broker who knows what you’re eligible for
- Possible discounts. Online brokers often can 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.
- 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.
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
What if I don’t earn enough to qualify for a car loan?
Many car loans are secured with an asset, such as the vehicle you’re purchasing or other valuable property. You can use the collateral to lower the total cost of your loan, but if this still isn’t enough, consider finding a cosigner to help with your purchase.
Can I have my loan approved before I start car shopping?
After an initial assessment, some online brokers offer conditional preapproval before submitting your application to lenders. This means the broker believes you’ll qualify for a loan, and you can use this preapproval to guide your car shopping.
How do I know I can trust the lender?
Since you’re not dealing with the lender yourself, it’s a good idea to make sure you’re borrowing from a reputable service. Check to see whether the lender is registered and licensed in your state of residence.
It also helps to research previous customer’s reviews to see if they match with the lender’s claims. If you have any reason to doubt the legitimacy of a lender, you’re under no obligation to finalize the loan.
Image source: Shutterstock
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