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Car Loans: Bank, Credit Union Or Dealer Financing?

Written By, NowCar Team

When it’s time to start considering your next vehicle, it’s nice to know that there are multiple options available to you. Whether you plan to go to a dealer or buy a car online, having the money for the car you want before hand will be very helpful.

The only question now is: how do you get that money?
If you have credit, any credit: the good, not-so-good and the bad, it is necessary to know what it is. Yes, even if its bad credit, there are still loan options available to you. Dealer financing will help you only if you choose a car at that dealership, so you are already limited. Dealers are also more likely to give you a higher monthly payment or can turn you down altogether, leaving you with an embarrassing memory.

Car loans through a credit union or a bank offer a more personal experience and therefore you are more likely to get approved. Credit Unions and banks will also supply you with the money before you get to the dealer or go online so you will have the money to shop with rather than the other way around. This gives healthy, responsible and realistic parameters to work within that won’t leave you broke or likely to damage your credit.

Dealer Financing

Dealer financing isn’t a bad choice, but it’s not too likely to happen if you have bad credit and no cosigner. Dealers reserve the right to be very particular about who they choose to finance. True, they want your business, but not if it presents a clear risk for them. If your credit is even a little blemished, they will make you pay, literally, for it.

You will also need to be picky about the dealer which means doing your research. Make sure this dealer has a solid reputation for lending money. Word of mouth is a strong resource here and you should use it. Ask people you know if they have heard anything positive or negative about the place you’re looking at.

While they may not be looking to pull the wool over your eyes, dealerships move quickly for a reason. Do not feel pressured to get into any deal that you are not completely comfortable with. Keep in mind that dealerships make money off commissions, so they want your signature. Make sure you know what you’re getting into before you sign the dotted line.

Credit Unions

There are credit unions available in most cities, towns and neighborhoods across America. Credit Unions operate with and for the local economy, working with local business and lenders to get the backing to give loans to people who are part of the community. Because credit unions work more specifically with borrowers who have no to little, or maybe not stellar credit history, all borrowers are welcome to apply and most get approved. Credit Unions aren’t owned by big bankers, so the whole experience really is more personal. Because of this, your interest rate is more likely to be negotiable.


If Credit Unions don’t seem as appealing as the solidarity of a bank loan with your trusted banker, then go where you feel comfortable. With banks, you’ll be applying for a personal or car loan which due to its size will yield a smaller interest rate and payment. Banks are likely to loan you the money you need if you can prove you have a steady income and if necessary, provide a co-signer. Sometimes, you won’t need one, but if you are questioning it, or they are questioning it, certainly having one available adds an extra buffer. Because most bank loans are in large sums like for a mortgage, small business or student loans, personal and/or car loans may come with a smaller interest rate, but it is less likely to be negotiable.