Which Is Better: Local Auto Loans or Online Loans?


Purchasing a car by local auto loans may be one of the most important financial decisions you will make. While many auto customers end up paying for their vehicles upfront, most will likely take out an auto loan, whether from the auto dealer directly, a local bank or community credit union, or an online lender.

Auto loans function just like other loans—a lender loans you the money to cover part or all of the purchase of a vehicle, setting up your vehicle as collateral. You pay back the loan, including interest and other additional fees the lender may charge, within a fixed period of time (called a “loan term”). And just like other loans, an auto loan doesn’t come as a one-size-fits-all deal. Each lender offers different plans with a variety of interest rates, depending on a number of factors, such as your credit score and the age of the vehicle.

Just as you should compare vehicles and prices between dealers before choosing the right car, so too should you compare auto loans between lenders. Fortunately, most local institutions provide online services, joining the vast network of other online lenders, making it easier to shop around. However, experiences will differ between securing local auto loans from brick-and-mortar institutions, like Rivermark Community Credit Union, or from any number of online lenders.

So, which is better: local auto loans or online auto loans? Each option comes with its own set of pros and cons and may be determined more by your habits, confidence, and timeliness than just a lower monthly payment.

Local Auto Loans

Local institutions, such as banks and community credit unions, can provide a number of standard loan options comparable to many online lenders and can work with you one-on-one in securing the best loan that meets your needs and lifestyle. However, these same institutions are faced with certain challenges when it comes to competing with online lenders. Small, brick-and-mortar institutions may move more slowly when approving you for a loan or processing your application, and they typically offer less competition and higher interest rates than what you might otherwise find online.

One upside of applying for local auto loans is the overall experience. Whether in-person or using their online services, securing an auto loan from a local institution will likely be a more comfortable process with better customer service. Local institutions can work directly with you to better understand your needs, financial situation, and lifestyle habits, tailoring loans specifically to you. They can also provide practical financial advice and help you establish a payment plan. Having a sound and consistent payment plan is crucial to avoid missing your payments, which would lower your credit score and result in the lender repossessing your car.

By working with a local institution directly, you establish and build a relationship with them, which can come with a number of benefits. Many institutions offering a comprehensive membership plan will factor in your history with them when setting your loan’s interest rate, among other details. And by applying for a local auto loan, you also support a local institution in your community.

Online Loans

Finding a lender online is more convenient and streamlined than it was 15 or 20 years ago. So when it comes to finding an online lender with a low auto loan interest rate, the odds are in your favor. And with a number of online loan rate comparison charts, including this list by NerdWallet, finding a trustworthy online lender is easier than before.

While neighborhood lenders can provide excellent customer service and individual support, online lenders are quicker and generally less expensive. And you have access to a wider number of lenders and loan options to choose from online. Preapproval can be almost instantaneous with many online lenders, and most offer a quick turnaround for processing your application.

Additionally, online lenders compete with each other over interest rates, offering lower rates than most local institutions. So in many ways, securing an online auto loan is the better option, especially if you have a low credit score, can’t afford to pay higher monthly interest rates, or need to purchase your vehicle immediately.


But with these obvious benefits come a few drawbacks. The majority of online lenders can’t provide personalized loans, as they won’t know who you are. So online auto loans are frequently standardized. Also, as the process is anonymous, there’s less chance of developing a relationship with your lender, and there may be generally fewer financial options and services that would otherwise result from knowing your lender.

You’ll have to devote more time to navigating the process yourself and developing your own payment plan (if automatic payments aren’t a feasible option or would incur a slightly higher interest rate, as in some cases). Not having someone to guide you through the process of securing a loan or helping you develop a strategy to make your payments on time might be daunting for some people, especially first-time car owners.

The Bottom Line

Trying to decide whether to apply for a local auto loan or an online loan comes down to your own preferences and needs. Securing local auto loans comes with many advantages, including a better customer service experience and starting or developing a relationship with a bank or credit union in your community, such as Rivermark. In many ways, going with a local auto loan is the more financially secure and mutually beneficial option.

On the other hand, online loans are faster, easier, and less expensive. While you’ll have to do more of the legwork and homework on your own, going the online route with a highly rated, recognized, and trusted lender may be more financially feasible.

Nevertheless, it’s important to shop around for your auto loan, whether you’re preparing to make a purchase or refinance your current loan. Investigating your options and equipping yourself with as much information as possible before taking out a loan can help you avoid making financial mistakes while building your confidence as a buyer.


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