What Are The Benefits of Bank Car Loans?

Bank car loans are financed through a bank instead of a dealership or other lending service. To seek a bank loan, a borrower typically knows the exact car and financing he or she will need then approaches a bank regarding options. Loan amounts and terms will depend on the borrowers' financial history as well as the type of car they are purchasing. Ultimately, there are a number of advantages of using a bank instead of a car lender to secure financing for a vehicle.

Better Terms

Dealerships often offer incentives like lower annual percentage rates (APR) in order to entice buyers to purchase a vehicle from them. It is not uncommon to get a lower interest rate quote from a dealer than from a bank. However, dealers often build in unfavorable loan terms to compensate for this issue. When a dealer offers a low introductory rate loan that will adjust as the loan ages, the borrower should be particularly wary of bad loan terms preventing them from modifying or paying off the loan early.

Banks typically offer better terms even if the interest rates are slightly higher. Bank loans may also present more options to the borrower. For example, dealer loans typically come in 3, 5 or 7 year options with a set interest rate and monthly payment at each option. The dealer may not have much room to negotiate because he or she is just a representative of a larger finance company. Bank loans allow for more negotiation since you are meeting face-to-face with the actual loan representative. 

Savings-Secured Loans

There are many different options for securing a loan with the bank to lower your interest rates. While a dealer typically will secure the loan with the title to the car, you can secure a loan through alternate means through the bank. One appealing way to secure, or place collateral against, the loan is through your savings account with your dedicated bank.

A savings-secured loan allows you to take a loan up to a certain percentage of the amount you have in savings. This allows you to keep the money in your savings account and earn dividends while still getting the cash you need for a car purchase. These loans are typically offered at lower interest rates than unsecured bank loans or credit union loans. They are a good way to put your savings to work without spending the money you have allocated for future purchases.

Revolving Credit Loans

Revolving credit lines or credit cards present an alternative financing method that some borrowers will prefer. It allows borrowers to set monthly payments themselves based on the financing they have available. This means you can pay the minimum required amount or the whole balance depending on your preferences.

Revolving credit lines are much more flexible than installment loans. A credit card or credit line is typically an open-end loan. This means you, the borrower, can modify the loan in the future. You can seek to have the limits expanded, monthly minimums changed, and even ask for lower interest rates. Open-end loans are often easier to manage for a borrower who has an unpredictable income over time. 

 


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