Canadians with bad credit face roadblocks at every turn, especially when accessing essential services such as cars. However, thanks to alternative lending options, like in-house financing, there is a way to secure reliable transportation and find your way to financial recovery.
In this post, we’ll discuss in-house vehicle financing, how it differs from traditional lending, and the unique pros and cons that accompany it. Keep reading to learn more.
What is In-House Vehicle Financing?
In-house financing is when a loan is provided directly from the retailer you are purchasing from. When you use in-house financing, you do not need to work with traditional lenders, like banks or other external lending institutions.
When it comes to financing a car, in-house financing means borrowing funds directly from the dealership and making loan payments directly to them. You might see in-house financing advertised as ‘buy here, pay here’ financing.
What is the difference between bank financing and in-house financing?
Unlike banks, dealerships that offer in-house financing can afford to be more flexible in their approval process. For example, if you have a credit score lower than 580, banks will usually deny your loan application because that falls below their credit threshold. On the other hand, dealerships can consider the entirety of your financial profile, including your income and potential down payment.
This core difference allows people to purchase a car even if other lenders have denied them financing. However, this flexibility comes with a higher price. In the next section, we’ll break down the pros and cons of in-house financing.
Pros and Cons of In-House Vehicle Financing
As mentioned, in-house financing comes with pros and cons.
The most significant benefit of in-house financing is its accessibility. Typically, dealerships are more flexible about who qualifies for these types of loans, making them great options for people who don’t qualify for a standard car loan, especially for individuals with bad credit or no extensive credit history.
However, this flexibility comes at a cost. This type of financing is usually more expensive than traditional car loans through conventional lenders, meaning you will pay more for your vehicle in the long run. However, some people are willing to deal with this elevated cost to access a car and start building their credit.
Additionally, in-house vehicle financing is not offered at all dealerships, meaning you might have a limited selection regarding vehicle inventory.
Finally, some dealerships might not report loan payments to Canadian credit bureaus. While this might seem like a good thing, remember that even if you are making your payments on time, this will not help improve your credit score. If you are looking to rebuild your credit, make sure that your dealership reports your payments to a credit bureau.
Improve Your Credit and Secure Vehicle Financing with Auto Loan Hub
Don’t let your bad credit score prevent you from securing vehicle financing. When you partner with Auto Loan Hub, we’ll ensure you find the right financing option, no matter your financial situation. We specialize in helping Canadians with all credit situations, so contact us today to explore your options. We’re here to help get you on the road in no time! Learn more at our website.
