Buying a car is a big process. There are a lot of things that are helpful to know before you jump in. One aspect that can be confusing for many is auto loans. With so many options out there, what do you choose? More importantly, if you have no credit or bad credit, is there even anything available to you?
One option that's advertised, especially for those in a less than stellar credit situation, is in-house financing. You may wonder what it is—and if it's something that will even work for you. It's easy to get suspicious, but when you take a good look, you'll probably find that in-house financing is an excellent solution for those in a tough situation.
What is In-house Financing?
Before you can get to the advantages or disadvantages of something, you have to know what it is. In simple terms, in-house financing is paying the dealer directly for the car you purchase. It means no bank, no third parties—you are buying and paying for a vehicle all in one place. Often, the main difference with in-house financing is that you'll talk about the money before you start to look at the cars. This way, you are more likely to end up with a car you can truly afford.
Will In-house Financing work for you?
The thing to remember with any loan situation is that if you don't take responsibility (make payments) then it won't work out. If you do make your payments, in-house financing can be a good option for those looking to rebuild their credit, or find financing when they aren't able to secure a more traditional bank loan.
Some of the things to be aware of before you decide to do in-house financing is that it does have its drawbacks. You will most likely have to pay a higher interest rate. It's helpful to do your own research as well. With in-house financing, you may end up paying more than a car's estimated value due to some of the loan terms. You'll have to decide if that's something you're willing to do to get into a vehicle. Also, it's essential to know that like any auto loan, if you don't pay, the vehicle will be repossessed.
The Advantages of In-house Financing
If you've decided that you do need a car, and that in-house financing is the ideal situation for you, then there are some advantages to it. It can be very helpful for those who have no credit or bad credit. The advantages include:
- Getting approved – If you've run into issues getting approved, you'll find that many places that do in-house financing will be able to get you into a vehicle you can afford.
- Rebuilding credit – One thing dealerships that offer in-house financing do is work with you to find a monthly payment you can make. By making payments on-time, and eventually paying the car off, you can improve your credit score.
- More flexibility – In-house financing often allows a dealership to be more flexible when it comes to a person's situation. They have a lot of experience, and receive many applications. They'll assess the situation and make something happen. These dealerships are also known to throw in an incentive or two when they can. Another way in-house financing is flexible, is the ability to refinance. If you've paid on-time for a year, the dealer might be able to reevaluate your situation and get you a lower interest rate. Terms are often more flexible too. You can get longer loan periods, lower down payments—anything that helps you get into a car.
- A quicker process – When you do not have to deal with a third party, you can get down to business quicker. You'll most likely drive off the lot faster than if you'd gone to a traditional dealer.
- Trade-ins – Many dealerships that deal with in-house financing are more flexible when it comes to the age of your trade-in. They are looking for affordable cars, which may be a way for you to earn some down payment money for your next vehicle.
The answer at the end of the day is that you can trust in-house financing—as long as you understand what it is and how it works. For many, in-house financing has been the solution to a big dilemma. It has allowed them to get into a much-needed car. If you have any more questions, it can be helpful to go talk to a dealer who offers in-house financing. That way, they can answer those questions and tell you about what they'll be able to do for you.
