In-House Auto Loan Financing | Valley Auto Loans

Dealers who finance in-house

What is in-house auto financing?

First, let’s make sure were talking about the same thing.

This simply means that the car dealer takes the place of the lender to provide a loan for car buyers with inadequate credit and will carry the loan until it is paid off or refinanced. In most cases the loan history will not be reported to any credit agency. Unlike traditional car loans, in-house auto loans are usually structured for weekly or bi-weekly payments, depending on how often the borrower gets paid.

With in-house auto financing, there’s no reliance on the major credit reporting bureaus. Proof of income and steady residency is usually all that’s required. Traditional lenders refuse loans because the applicant is deemed not credit-worthy based on the credit reporting agencies.

Dealers Can Sell The Less Valuable Cars

In-house dealer financing hit a growth spurt in the wake of the economic downturn. There was an increased need to find a way to secure car loans for people whose credit had been damaged, often through no fault of their own, due to job loss, illness or divorce. Working people with bad credit found themselves asking the question, “How can I get back and forth to work if I don’t have a car.” This also created an avenue for dealers to sell the less desirable cars that they have taken in trade, to buyers that because of their credit history, don’t have the ability to secure a loan for a better quality car.

In-house lenders exists for two reasons. Dealerships want to sell more cars to more people. And there are responsible, hard-working people out there with damaged credit that need to buy a car. If you’re dealing with an ethical business, it can be a win-win for everyone. If it’s a buy-here, pay-here dealership, you purchase your vehicle through the dealership instead of a third-party lender and you probably won’t be repairing your credit score.

Who uses in-house Lenders?

For those who can’t get a traditional loan, in-house lenders sounds pretty good. But, if you’ve been turned down because of poor credit, no credit, a past bankruptcy, or you’re a first-time buyer, you still need to get to work, right? People who have been turned down by traditional lending institutions make up most of the customer base for in-house lending.

If you’ve gone from a good credit score to having damaged credit, it may be difficult to accept that you not longer qualify for the best rates for a car loan, or even for approval. Once you’ve exhausted the traditional lending institutions, you’ll be relieved to find that there are dealerships out there that are willing to take a chance on someone with less than perfect credit.

How does it work?

Your car shopping experience begins by meeting the financing manager to get a realistic picture of what you can afford and what your payments will be. With that information, you can confidently look at the cars within your price range and make your choice based on your budget. You know where you stand financially before you shop and are less likely to be distracted by that “beauty” on the lot that catches your eye. Focus. Stay within your budget.

Know The Facts

Read everything you sign to help eliminate deceptive practices or in-house auto loans that can damage your situation further. Pay attention to the term length of the loan. A longer term may reduce your payments, but in the end, you’ll end up paying more interest. You have to determine what’s best in your situation.

The interest rates are higher than traditional loans because the in-house lender in assuming a risk when others won’t, but if you negotiate purchase price instead of monthly payments, you’ll be ahead of the game. You can often lower the interest rate by increasing the down payment.

On the other hand, you may want to negotiate a lower down payment. If you’re in a bind coming up with the money for a down payment, reducing it can help cover the additional expenses associated with buying any car, like tags and insurance.

What is a zero down car loan?

Most car loans, even in-house loans, require at least a small down payment. To cover this minimal requirement, dealerships can accept the value of a trade as the down payment. If the trade doesn’t cover the down payment, they can give the full amount and roll over the remainder into the loan.

It’s always a good idea to make the best down payment you can, so that later, when you want to sell or trade, you don’t find yourself “under water” because of the zero down loan that looked good at the time.

What are the benefits of Dealer financing?

You get the financing you need quickly, find the car that fits your budget, and often drive away the same day. It’s a great option if all you want is a car without a lot of hassle.

In most cases, with a year of on-time payments, auto refinancing is an option. Often, a lower interest rate is possible, or a change in the length of the term of the loan. If you’re in better financial shape, you might want to shorten it to pay it off sooner. If you’re still having financial difficulty, you might want to consider extending the term to lower payments. Again, you’ll pay more interest in the long run, but will be able to afford the monthly payments.

For those who are just starting out and have no credit or for those who are coming out from the other side of a bankruptcy, in-house loans are a reasonable alternative when it seems no others exist.

The approval process for no credit or bad credit car loans is quick and easy. In some cases, your in-house lender does a credit check. If the loan is approved based on reporting to credit agencies, your on-time payments will improve your credit rating, but this is most often not the case.

Will This Repair My Credit?

Ask if they actually do a credit check. If you’re trying to improve your credit rating, keep in mind that most in-house financing doesn’t depend on credit reporting agencies for approval. In the majority of cases, an in-house loan isn’t reported to those agencies, so even if you pay the loan off “as agreed and on time,” that information won’t show on your credit report. It’s not necessarily a bad thing, but you need to know where you stand.

In-house loans can add cost in the form of higher interest rates, and often don’t contribute to improving your credit score, but there are other avenues to pursue to improve your credit rating. For tips about other ways to improve your credit score, go to

Want more information?

Valley Auto Loans offers complete auto financing and can help find the right vehicle for you, even in these difficult times.

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