Just a few years ago, the thought of online car loans might have seemed a little futuristic. However, the internet has shortened the distance between lender and customer. Studies show that 27% of Brits are happy to purchase their cars online without a test drive. So why should financing be any different?
Car loan financing has certainly come a long way in recent years. However, if you’re considering online finance, it still helps to compare what’s on offer with traditional channels to ensure you’re getting the best deal.
The advantages of online car loans
Quick turnaround time
If you know your way around online loan applications, it will take you a matter of minutes to complete an online car loan application. Compare that to a traditional brick-and-mortar setup, and it’s very likely that the latter will take you longer. Not only do you have the commute, but you may also have to wait for a consultant.
Greater range of options
A great advantage to online applications is the availability of financial institutions. Once you have your details and documents saved, it only takes a few minutes more to apply with other institutions to see which one offers the best deal.
Just a word of caution: make sure it’s a ‘soft’ application, as these don’t have too big an impact on your credit score. Too many ‘hard’ applications with various institutions at the same time can have a negative impact on your credit score.
When you make the effort to visit individual finance institutions, you need to provide your financial information over and over again. This could result in the damage or loss of certain important documents. Online applications are much simpler, as you only need to save your documents to your drive once.
Easy access to car dealerships
If you apply directly through a dealership’s finance portal, the approval immediately allows you to source your car from that dealership’s stock. This means that once you’ve selected your car, you only need to drive to the dealership once, and that’s to collect your car.
Saving time with pre-approvals
One of the most frustrating things is finding a car that suits your needs, only to learn that the monthly instalments are out of your price range. With an online pre-approval, you know what you qualify for and whether it’s within your means.
Potential disadvantages of online car loans
Long-term banking relationships may not matter
Longstanding customers who have a good track record with one lender might miss the opportunity to negotiate a better deal if they apply online with another lender. By physically visiting the lender, you may have a chance to negotiate a better package than the one-size-fits-all online contracts.
You might be dealing with an unscrupulous lender
It’s important that you only share your personal information with well-known and reputable institutions. Bear in mind that an application for car finance will require a lot of personal information, which means keeping your information secure is important.
Loan scams provide fraudsters with easy access to your information, and a potential fallout is identity theft. Being able to identify a potential scam ahead of time could save you a lot of frustration and prevent financial loss.
You might skip reading important loan information
The thrill of a new car might make you click through the terms and conditions too quickly, which may leave you vulnerable later on. There is no consultant who will highlight important information, which means that the onus is on you to check that the information is correct and agreeable. Simple things such as the annual percentage rate (APR), loan term, or service costs might be overlooked.
Quick tips to get the best out of online car loans
- Choose a reputable financial institution.
- Compare your offers to make sure you get the best APR, service fees, and loan term.
- Only do a hard application when you’re ready to buy. Do a soft check first for pre-qualification so your credit rating doesn’t drop unnecessarily.
- Make sure your documents are saved in an easily accessible location for easy linking.
- Read the terms and conditions before you accept the agreement.
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