What is an Online Auto Loan?
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Buying a car with an auto loan is faster and easier than ever before. Gone are the days of visiting your local bank to ask for a loan, or being at the mercy of a car dealership’s financing option. Now, you have the convenience of online auto loans just a few clicks away.
Online auto loans are available through a number of different lenders, and this type of loan comes with many benefits.
Here’s what you should know about online auto loans, and what to consider before applying for one:
What is an online auto loan?
An online auto loan is a type of personal loan that you can apply and get approved for entirely from your computer or mobile device. It’s intended to be used toward the purchase of a new or used car, and you can sometimes receive a loan decision in minutes.
With many traditional financial institutions, shopping for an auto loan means applying for financing through that lender only. They have the option to either approve or deny your application, and they’ll show you the interest rates and loan terms that they’re willing to offer for your car purchase.
But an online auto loan enables you to shop around for funding through multiple different lenders, often at the same time. Since online lenders don’t have the overhead of maintaining physical branches, they tend to offer lower rates than traditional financial institutions — especially for people with good credit.
Benefits of an online car loan
While online car loans can come with especially competitive interest rates for people with excellent credit, they can be a good financing option for nearly every borrower. This is especially true if you need a loan quickly or you have poor credit and aren’t sure where to start looking.
Competitive interest rates
It’s common for online auto loan lenders to offer lower interest rates on loans compared to traditional brick-and-mortar banks. You can visit individual lender websites to also see their available rates, often in just seconds. This allows you to compare multiple offers to find the auto loan that works best for you. Some online lending platforms, like Credible, allow you to compare rates and loan terms from multiple lenders in one place, without having to visit individual lender websites.
Some online auto loan lenders also offer the option of prequalifying for a loan. This involves a soft credit check and won’t hurt your credit. Prequalification lets you see what auto loan rates you might qualify for with multiple lenders before any lenders conduct a hard credit check.
Getting prequalified isn’t a guarantee that you’ll be approved for a loan — you’ll still have to complete a formal application with the lender you choose — but it can give you a good idea of what rate you might be able to get.
The personal loan companies in the table below compete for your business through Credible. You can request rates from all of these partner lenders by filling out just one form (instead of one form for each) and without affecting your credit score.
|9.95% – 35.99% APR
|$2,000 to $35,000**
|7.29% – 17.99% APR
|$10,000 to $50,000
|4.99% – 35.99% APR
|$5,000 to $50,000
|5.99% – 24.99% APR
|$2,500 to $35,000
|7.99% – 29.99% APR
|$7,500 to $50,000
|7.04% – 35.89% APR
|$1,000 to $40,000
|7.99% – 35.99% APR
|$2,000 to $36,500
|3.99% – 19.99% APR
|$5,000 to $100,000
|6.99% – 19.99% APR1
|$3,500 to $40,0002
|18.0% – 35.99% APR
|$1,500 to $20,000
|5.99% – 24.99% APR
|$5,000 to $40,000
|5.49% – 17.99% APR
|$600 to $50,000
(depending on loan term)
|7.95% – 35.99% APR
|$2,000 to $40,000
|6.99% – 22.28% APR10
|$5,000 to $100,000
|8.93% – 35.93% APR7
|$1,000 to $20,000
|5.94% – 35.97% APR
|$1,000 to $50,000
|4.37% – 35.99% APR4
|$1,000 to $50,0005
|Compare rates from these lenders without affecting your credit score. 100% free!Compare Now
|All APRs reflect autopay and loyalty discounts where available | LightStream disclosure | 10SoFi Disclosures | Read more about Rates and Terms
Convenient application and funding process
Applying online for an auto loan is quick and easy. You can conveniently apply for a loan 24/7 from anywhere, using a computer or other mobile device. With this option, you don’t have to go into a brick-and-mortar location to manage your loan.
Lenders typically deposit money from an online loan very quickly, as well — sometimes as soon as the same or next business day after approval. This enables you to shop for your next car as a cash buyer, which may open the door to better deals.
May qualify even with poor credit
Taking out an auto loan (or any financial product) can be difficult if you have bad credit — but it’s possible. While lenders might offer you a higher annual percentage rate (APR) than someone with good credit, you may be more likely to find a lender who specializes in working with poor credit borrowers by shopping online.
Online auto loans allow you to sift through multiple lenders with ease. Some online lenders list their loan eligibility requirements on their websites, which can help you identify which lenders might be a good fit.
Disadvantages of an online car loan
While taking out an online auto loan has a lot of advantages, you should also keep in mind a few potential disadvantages.
Might not qualify for the lowest interest rates
While online interest rates tend to be competitive, that’s not guaranteed. In fact, some lenders might even have higher interest rates than traditional banks and credit unions, particularly if your credit isn’t in the best shape.
To help combat this, you could add a cosigner with good credit to your auto loan application. A cosigner is someone, like a close friend or family member, who will be responsible for making your loan payments if you aren’t able to. Applying with one can help increase your chances of loan approval and help you qualify for better interest rates.
Could end up ‘upside down’ on the loan
As with any loan, when you’re applying for an online auto loan you should only request the loan amount you actually need to buy the car. You should also keep in mind that new cars depreciate in value almost immediately. If you take out a large loan to pay for one, you could end up owing more over time than the car is worth — this is called being upside down on your loan, or having negative equity.
If you make a small down payment to buy the car, or you don’t have a down payment, you may find yourself in a negative equity situation. Being upside down on your auto loan can be an issue if the car is totaled or needs to be sold later on.
Be aware of scams or unfamiliar lenders
Traditionally, getting an auto loan meant applying through a lender or bank you already knew, and likely already used. When shopping online for a car loan, however, you may come across companies you’ve never heard of. This doesn’t mean they aren’t legitimate businesses, but if you don’t do your homework it could possibly open the door to scammers.
Do your research to make sure you’re dealing with a legitimate loan lender before giving out your personal information. If a potential lender is asking for too much information — or wants personal info that doesn’t seem relevant to the loan application — be wary. Also note that legitimate lenders won’t request payment upfront for things like application or origination fees. Reputable lenders won’t deduct any relevant fees until they disburse your loan funds.
With Credible, you can see your prequalified personal loans from our partner lenders before you apply, so you can trust you’re getting accurate information about any of our lenders on the platform. Credible also offers 24/7 customer service if you have any questions about the application process or need help with a particular lender.
Helpful tips when shopping for an online auto loan
If you’re in the market for an online auto loan, here are some things to keep in mind:
- Don’t borrow more than you need. Avoid borrowing more than you need to buy a car, and pay attention to how your loan balance will correspond with your vehicle’s equity to avoid becoming upside down on your loan.
- Shop around and compare lenders. It can pay to shop around and compare auto loan quotes from at least three to five different lenders. This makes it easier to find the best deal for your personal situation, depending on factors like your credit score and how much you need to borrow.
- Read the fine print. If you’re approved for an auto loan, be sure to read the fine print of your loan agreement before signing. Pay close attention to any fees the lender may charge, and how they could affect your loan payments.
Online auto loans are a convenient option when it comes to financing a car. They enable you to shop for the best possible rates and loan terms from multiple lenders, without ever leaving home. They also offer fast funding so that when you find the perfect car, the car-buying experience can be easier than ever.
If you’re ready to find a lender, Credible can help: You can see your prequalified rates from multiple lenders in two minutes after filling out a single form.
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