What are the pros and cons of securing your own auto financing, from a lender such as e-loan for example?
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Answer:
GK mentioned some good points. Stay away from the E-loan deal or Lending Tree because they will "shotgun" your credit to various lenders (meaning they'll have numerous lenders pulling your credit). This is detrimental to your credit to a small degree. The bureaus do take into account if you're shopping for a car, you'll have some credit inquiries. The myth that your credit will fall greatly is untrue. This only happens if you're applying for various types of credit in a small period of time. Such as applying for car loans, credit cards, and mortages all around the same time.
Look to Capital One and Road Loans. They are two lenders that specialize in fair to poor credit auto loans. They'll ask for your verifiable income, residence, time on job, etc. By gathering this, they'll pre-approve you up to a certain dollar amount they feel you can handle. Then, they'll send you a check. They'll require you to buy from a franchised dealer, a certain model year or newer, and under a certain mileage range.
Now, that being said, don't overlook letting the dealership try to acquire you financing as well. Go ahead and secure your financing through companies like I just mentioned, and then give the dealership a chance too. Many times they have relationships with local banks or credit unions that may be more leanient lenders than can offer you a better rate.
Also, if you should get turned down from Roadloans or Cap One, many dealerships will still have great special financing options that you may very well qualify for. So don't give up hope.
You're better off buying cars that qualify for traditional financing than at a buy here pay here lot. You'll get a later model, lower miles vehicle that will be more dependable. Nothing is worse than making a car payment AND having to pay for repairs as well. And many times the higher miles cars at buy here pay here lots WILL have trouble.
And don't expect to get a low advertised rate. If your credit is less than perfect, you'll have a higher rate. In essence, you're buying your credit back. This is just the way it will be.
Long story short, "fair" credit will always get you a higher interest rate. With that said, you do tend to be at the mercy of the lending dept at the dealership if you are not armed with some info before you get there.
A few things to keep in mind. Each time you contact a lender for a quote they will "pull" your credit record. Every time it is pulled it drags your rating down just a little. If you have a lot of recent activity it could be a red flag. However, it would be best to have at least one quote under your belt before you get to the dealership.
The problem with that scenario is that you have nothing to get a quote on. The lender can "pre-qualifiy" you; in other words they can tell you yes or no, but they typically won't have a rate for you up front, but they may.
One thing that some dealerships will do, or have done in the past, is get you qualified, then add percentage points to your lowest quote, then tell you what the rate is based on that. Once you sign the papers they get a bonus from the lender for those extra points. The only way to avoid this scenario is to find someone that will pre-qualify you and give you some reasonable idea what interest rate you should expect. Once you have that you will be in a better position to negotiate.
I hope this has helped.
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