What Are Bank Car Loans?

Bank car loans are installment loans extended from a bank instead of another type of lender. Car loans often come from the dealer, manufacturer or other car lender. Bank car loans often have different rates and terms than those loans offered direct through a lender.

Higher Rates

Dealers often offer low-interest financing as an incentive to purchase the vehicle and the loan both from them. They make money on both purchases. Further, low interest financing can be a huge push for many buyers to purchase a new or used car. Bank loans do not offer these same incentives. 

Better Terms

Dealers often build in bad terms on car loans so that borrowers do not modify or consolidate the loan in the future. They also may have unfavorable terms because car lenders typically require lower financial standards of their borrowers. Banks, on the other hand, may have higher standards and higher interest rates. They compensate for this by offering more favorable terms in the contract for the borrower. 

Unsecured Loans

Car loans secured through the dealer often use the auto itself as collateral. The dealer will hold the car title until the loan matures. Banks may extend unsecured financing. 

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