You can pursue a car loan from a variety of lenders, locally or nationally based. Various lenders exist to accommodate different kinds of borrowers, good or bad credit alike. Consider your various resources; choosing the right lender can save you thousands of dollars in interest rate charges over your loan term.
Local Lenders
A variety of local lenders likely exist in your area. Local lenders include credit unions, local banks and nationally based lenders with a local presence, such as Chase, Bank of America or HSBC. These lenders determine interest rates based on a tier scale. The lowest rates are often advertised at bank websites, but only borrowers with excellent credit qualify for the lowest rates. Those with less-than-perfect credit could pay interest rates double or triple the best rates.
Special-Circumstance Lenders
Some lenders cater to high-risk borrowers who don't necessarily have bad credit. These borrowers include first-time buyers who lack credit history (good or bad), recent graduates or military personnel. Rates for these loans are not competitive, meaning you may not obtain the lowest rate available. Many vehicle manufacturer banks offer these types of programs. Find out more by visiting vehicle manufacturer websites to view current offers and finance information.
Subprime Lenders
Subprime lenders offer loans to high-risk borrowers, or people with poor credit who may not have other options. Interest rates are not attractive; many offer rates over 20 percent. Subprime lenders also require a large down payment and a shorter loan term. Loans from subprime lenders should be a last resort because of the high price of interest paid over the term of the loan. Also, the shorter term requirement and high rate often result in a high monthly payment.
Manufacturer Banks
To entice new car buyers, manufacturers offer low rates that can't be beat by other lenders, such as zero-percent financing or 3.9-percent financing for 72 months. Offers change monthly and are advertised on manufacturer websites. These banks do not use a tier system like traditional lenders. If you apply for special financing, you are either approved or you're not; your rate won't increase. Manufacturer banks are a bit more lenient, as well. You don't need excellent credit for to qualify.
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