Perks of Using a Lending Club Loan to Buy a Car
It’s best to buy a car with cash—but not everybody has saved up thousands of dollars when the need for new transportation strikes. Although car shoppers have several options for financing a new or used car, including many online lenders, buyers with good credit may want to consider another option available to them—a peer-to-peer personal loan of up to $25,000 like those available from Lending Club.
Why Use Lending Club for Your Auto Loan?
Pre-payment Advantage. Some car loans may not allow prepayments, or will penalize you for paying down the loan early which, of course, you should do if you can afford it. With a Lending Club loan, any additional you pay each month is automatically applied to the principal, making it easy for your to pay down your loan as early as you are able—saving you a load on interest.
Loan is Unsecured. Hopefully you’ll never run behind on any of your loan payments. But if you fall behind on an auto loan, the lender can repossess your vehicle—you know, send two scary looking armed repo guys to your house at 4 a.m. to tow your car. Lending Club loans are unsecured, meaning they can’t take your car if you pay late. (Paying late will still hurt your credit, of course, you just won’t risk losing your wheels).
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Ability to Shop Like a Cash Customer. Perhaps the biggest advantage of using a Lending Club loan to buy your next car is that you can walk into the dealership as a cash customer. This gives you considerably more room when negotiating for your car because the salesperson can’t use one of the auto industry’s favorite tricks–quoting prices as monthly payments instead of total price. You’ll be able to draw a hard and fast line with the dealer as to what you’ll pay.
How to Use A Lending Club Loan to Purchase a Car
Think using a Lending Club loan for your next car is a good idea? To start, you’ll need a credit score of at least 660 (check your credit score for free now). Next, you’ll need to apply for the loan amount you want on Lending Club and wait for the loan to be funded. If it is, you’ll get the loan distribution directly into your bank account. Then, you can shop for your next car with “cash”.
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The unsecured aspect is a really good point that I’d never thought of. But since it’s unsecured won’t you carry a higher interest rate than the same loan backed by the asset?
Also, I financed my car last year and have since helped a half-dozen others buy and finance vehicles. No one charges pre-payment penalties anymore. With my loan from Chase Auto, you just needed to check the box that said you were paying extra and the amount would go to principle.
This is a great intro to lending-club, I look forward to more advatanges to the system.
Thanks for mention! Just one note, our minimum FICO score is now 660, not 640.
Thanks,
dk
Product Ambassador
lendingclub.com
Weakonomist, good to know that many car loans have done away with prepayment penalties. And you’re right that all things equal, auto loan rates might be slightly less. The average 36 month car loan right now, according to BankRate, is 6.87%…Lending Club loan rates currently start about 1% higher, but it’s the same ballpark.
DK, thanks for the update on the credit score. I’ll make that fix!