There are three types of lenders when you are looking to get an auto loan.  Most people are only aware of two different types; the direct lender and the indirect lender.  However, the third is a buy here pay here auto loan which will be discussed as well.

Direct lenders are lenders that offer auto loans directly to consumers.  These auto loans are normally given to people with fair to excellent credit.  Consumers that get an auto loan from a direct lender can shop around, and pretty much get the best interest rates for their auto loan.  Primary examples of direct lenders are traditional banks as well as credit unions.  Direct lenders are much more stringent on their underwriting guidelines and it is significantly harder to receive an auto loan from a direct lender.

Indirect lenders are lenders that give an auto loan through the dealership that you are visiting.  Most indirect lenders are less stringent than direct lenders and offer auto loans to people with no credit, bad credit, or people who have claimed bankruptcy.

The last step for people with bad credit is the buy here pay here auto loans.  People with bad credit that need a car badly often turn to local car lots that offer the buy here pay here auto loans.  What that means is that the car lot dealer is offering the car loan, not a finance company.  They are essentially giving auto loans to people without reporting it to credit reporting agencies as regular auto loan companies would do.

If you are looking to repair your credit by getting an auto loan, then this is really not the type of auto loan you need to receive.  You want to be able to prove later in life that you are capable of rebuilding your credit, and buy here pay here auto loans just aren’t the way to do that.  You are better off seeking an indirect lender first if you want an auto loan with bad credit.  If you have fair to excellent credit you are without a doubt, better off going with a direct lender for the best auto loan rates.