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The world of auto loans can seem confusing when it is time to start looking for a used car. If you are searching for a deal and looking at used cars 500 down in order to keep your costs low, looking at numbers and loan options can be overwhelming. The reality is that you do need to know the basics associated with getting an auto loan in order to make an informed decision. One topic that many first-time car buyers get confused about is the type of loan – direct vs indirect auto loans. Keep reading for a description of each type of loan so you are informed as you search for 500 down used cars.

Direct Auto Loan

A direct auto loan – or a direct loan in general – is a situation where the person taking out the loan has direct interaction with the institution providing the loan. For example, buy here pay here car lots provide financing for their vehicles directly to customers. Customers deal directly with the buy here pay here dealerships to get loans for the vehicles. This direct connection between the borrower and the lender makes it a direct loan.

Indirect Auto Loan

An indirect auto loan is a loan that involves a third-party lender. At a traditional car dealership, you can apply for a car loan but the actual loan comes from a financial institution such as a bank or credit union. You are going through the dealership to secure financing from a third-party lender. Since you are not dealing directly with the lender, this is considered an indirect auto loan.

Both types of loans can be a good option in different situations. If you have excellent credit and a large down payment, an indirect loan through a traditional lender can give you the money you need with a great interest rate. The downside is that the car dealership will not have any control over what happens with that loan because it is coming from an outside source. This means that you must meet the qualifications of the third-party lender exactly – there is no flexibility. Direct auto loans are a great option for anyone who has less than perfect credit. A buy here pay here in Phoenix, Arizona can provide you with a direct auto loan based on qualifications that have nothing to do with your credit score. The dealership has flexibility when it comes to financing decisions because they do the financing in-house. If you are looking for a direct auto loan, take a look at what Auto Action has to offer.