How to Choose the Best Auto Loan Service
The top performers in our review are Lending Tree, the Gold Award winner; RoadLoans.com, the Silver Award winner; and Alliant Credit Union, the Bronze Award winner. Here’s more on choosing Auto Loan Services that meet your needs, along with detail on how we arrived at our ranking of 10 programs.
Auto Loan Services can make the daunting process of buying a car easier. These services allow you to apply online and receive auto loan offers. The services we reviewed include direct lenders and brokers that connect you with financial institutions and local dealers. All these services allow you to apply online and get the funding you need so you can buy the car you want. The best services are flexible, so you can get funding before you start shopping for cars.
The services we reviewed include brokers and direct lenders, several of which are online-only banks. Most auto loans are used at dealerships, but if you want to purchase from a private seller, you can apply for an online personal loan. If you want to learn more about refinancing or getting a loan if your credit is bad, read our articles about auto loans.
Types of Auto Loan Services
During our research, we found that auto loan services fell into one of two categories. The services were either direct lenders or brokers. There are benefits and disadvantages of each type of service, but both allow you to apply online and receive offers for an auto loan.
Direct lenders are usually financial institutions that directly administer the loans themselves. These services have the advantage of allowing you to manage your loan online, including setting up automatic payments. The disadvantage of financing a car through a direct lender is that you usually only receive one loan offer, so there's less flexibility with these lenders. Some direct lenders, like RoadLoans.com, provide you with multiple offers that have varying rates and terms.
The main advantage of using a broker is that you can receive multiple offers from both dealers and financial institutions. This can be a great advantage as you shop around. Once you receive your offers, the brokers are no longer involved, so the repayment process varies depending on who you choose to receive a loan from. Through our testing, we found the best brokers to be those who provide you with offers from financial institutions and dealers rather than just dealers. A loan through a financial institution allows you to shop around at multiple dealerships, and that flexibility is an important factor in choosing an auto loan service.
What Factors Influence Your Auto Loan Rate
The terms of your auto loan depend on many factors. Chief among them is your credit score. When you use a service to request a quote on a car loan, that service pulls a report on your credit. Since you're applying for a loan, this is considered a hard pull and affects your credit score. Most credit agencies bundle multiple credit requests made in one period, so if you are worried about your credit rating but want to shop around, you have a 45-day window where all requests are bundled together. This gives you a window to apply for multiple loans and compare the offers you receive without worrying about your credit score suffering from multiple requests.
Other factors that lenders consider when creating a loan offer are the length of the loan, the down payment, the age of the vehicle and your debt-to-income ratio. Debt-to-income ratio shows prospective lenders that you earn enough money to pay back any new debts you may incur. A few of the services in our review have minimum monthly income requirements, with $1,800 a month being the most common, though Carfinance.com requires interested borrowers to earn at least $2,000 a month.
What We Evaluated; What We Found
Since loan rates can vary so much based on personal factors and the specific vehicle, we reviewed these auto loan services on their application and repayment process. Our reviewers also looked at the where the loans would come from, since many of the services we reviewed are brokers. Flexibility emerged as a key differentiator in our testing. The best services allow you to receive multiple loan offers and shop around for cars from franchised, independent and private sellers.
Application: Speed & Simplicity Matter
Each service we reviewed, whether a broker or direct lender, allows you to apply for car financing online. As part of this application process, you have to submit your Social Security number (SSN) and, in some cases, information about your income and employment history. As part of the application process, we also looked at whether you can sign all documents online. Some services send you the documents to take to the dealer you purchase the car from. We also looked at the pre-approval times of each service, which tended be quick. Most services can get you pre-approved in the same day. Some can take longer, with BlueSky Auto Finance having the longest pre-approval wait of up to 72 hours.
Repayment: Automatic Payments Are Best
Many of these services allow you to create online accounts. With brokers, these accounts allow you to monitor the status of your application, but since brokers do not fund loans themselves, you can't use that account to pay the loan. The direct lenders we reviewed allow you to repay through their sites, and most allow you to set up automatic payments.
Loan Versatility: The Freedom to Shop Around
As part of our evaluation, we looked at the flexibility of each auto loan service. Flexibility includes if you need to have a car in mind or if you can apply for a loan without having car-shopped first. We also looked at whether you would receive multiple offers and if you can use your loan offer at multiple places. This gives you a greater control over where your loan can be used and can even give you a leg up when negotiating with the dealer.
Another important aspect of a loan service's versatility is where you can use your loan. Most services allow you to use your car loan at franchised dealers. Franchised dealers are licensed by manufacturers to sell their cars. Independent dealers are another option; these are smaller dealerships that sell a wider variety of mostly used cars. Most lending services allow you to use your loan at these dealers, though some may require you to contact the service for approval. Another option for using your car loan is with a private seller. Some services don't let you use your funding to buy a car from a private seller. This is one of the advantages of using a broker – you should be able to find the right funding to buy the car you want, no matter who is selling it.
Customer Service: Accessible & Informative
Every service was evaluated on its customer service. The best customer service representatives were helpful and knowledgeable about their service's process. We also took into consideration how easy it was to speak to the representative. Several services had multiple phone menus, but it was not immediately apparent which was the best choice for a customer looking to learn more about that service.
Most services can be contacted by phone or email. Several also have live chat on their sites. Most of the auto loan services also provide a knowledgebase on their website that includes tips, articles and calculators to help you make a better informed decision before applying for an auto loan.
Our Verdict & Recommendations
The best auto loan service in our review is RoadLoans.com. This is a direct lender that allows you to apply online and set up online payments through its website. It offers versatile loans that can be used at all types of dealerships.
Lending Tree is the best broker on our review. It provides you with multiple loan offers from a variety of financial institutions and has a quick approval time. It also has excellent tools for helping you find cars from local dealerships.
Nationwide Bank is an online-only bank that offers auto loans are part of its services. It has the best application process in our review, with the process being done completely online and having quick approval times.
Alliant Credit Union is a direct lending service that has the lowest minimum loan amount of the services we reviewed. It also offers versatile loans that can be adjusted if you find a car that costs more than you were approved for.
BlueHarbor and myAutoloan.com are two other brokerages that rated well. These two services can help you get auto loan offers. Both have quick pre-approval times and can usually get you offers within 24 hours, if not that same day.
CarFinance.com and up2drive are two other direct lenders worth investigating. These lenders provide flexible funding that you can use to shop around to find the car you want.
All auto loan service should have simple online application. Quality services include both brokers and direct lenders, but it's important to consider the flexibility of each service, especially if you don't have a specific car in mind. Getting a versatile loan that can be used at different types of dealerships can make your car-buying experience significantly easier.