Online auto loans are the car shopper's best friend. If you've ever shopped for an auto loan, you've probably felt at the mercy of the financing company, especially if you're going through a dealer. Hidden costs and fees, prepayment penalties and other hidden traps can make getting an auto loan a stressful experience.

The solution? Auto loans from online lenders. You can shop and compare different offers from lenders in the comfort of your own home, when you have the time to read the fine print and look for any hidden traps. Auto loans from online lenders typically feature many benefits not found through your local bricks-and-mortar bank or the dealership. So here are seven reasons to use an online lender the next time you're shopping for an auto loan:

1. Loan rates from online lenders are typically lower than from car dealers. Four highly-rated online auto loan sites are Capital One Auto Finance, E-Loan, Lending Tree and Auto Credit Finders. Auto Credit Finders specializes in finding auto loans for those with problem credit.

2. In addition to a low APR, online lenders typically feature no application fees for both new and used cars.

3. Here's a nifty feature you probably won't find through your local car dealership: loan payment calculators. Simply plug in the price, APR, and loan term and voila! This can help you avoid the dangerous trap of shopping for a car based on the monthly payment (which can end up costing you a lot more in the long run).

4. Online lenders allow you to bypass the bad credit loan scams as well as the headaches and frustrations of car dealership financing. If avoiding the stress typically associated with financing your car were the only reason to use an online lender, it would be reason enough.

5. Are you willing to sit in a dealership, going back and forth with the salesman about down payment, car payment, APR, etc? If not, an online lender can offer you quick approval in under an hour, even as soon as 15-30 minutes from the time you submit your application.

6. Here's one of my favorite features of online auto loans: no hidden finance fees, points or prepayment penalties for new car loans. If you're hoping to pay off your loan early, you'll want to get a loan with no prepayment penalties.

7. Need to buy a car NOW? Online lenders routinely FedEx your check so you can have it the next business day and be ready to buy that same day.
Your Best Bet for Getting the Deal You Need: Online Auto Loans

For my money, online lenders are the way to go. Lenders like Lending Tree and E-Loan offer you the ability to cherry pick among multiple offers, a choice you don't have with dealership financing. While your credit report and FICO score will largely determine the offers you receive, banks are amazingly creative when competing with each other for YOUR business.

So if you're in the market for a car and need financing, check out online lenders. You might be able to negotiate a significantly better deal than with your local bank or dealership.

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