Having access to financing can be the difference between buying a reliable, high-quality vehicle and being forced to go without one. Failing to secure a loan to finance the purchase of a car or truck can easily make life a lot more difficult, even in terms of earning a living.
Unfortunately, some people find themselves struggling to obtain financing from traditional sources like banks, credit unions, and lenders operated by vehicle manufacturers. Companies like Consumer Portfolio Services frequently lend a hand in such situations, much to the benefit of buyers.
A Different Approach to Automotive Lending
Conventional lenders typically extend credit themselves, making all the related decisions beforehand. Another type of arrangement sees a so-called “indirect” lender partnering with dealerships who are tasked with assessing loan applications.
When such a dealer approves a loan and then transfers a vehicle to the applicant, that contract will then normally be sold on to the indirect lender. This specialized company will then service the loan for the rest of its lifetime, accepting payments and addressing any issues that might arise.
An indirect lender can keep the loans it purchases from dealers, or it can sell them on to other parties. Most often, arrangements of the latter kind involve packaging many loans up into securities that can be marketed to investors more easily.
Many Types of People Benefit From Indirect Lending
This specialized form of lending has proved to be a great fit for the American automotive industry. Although most brand-new cars and trucks are still purchased using conventional types of financing, indirect lenders enable the sales of many lightly used, highly reliable vehicles.
In most cases, shoppers who end up using indirect lending services have difficulty obtaining loans of other kinds. People who have had financial problems in the past, for instance, will often have credit scores too low to qualify them for conventional automotive loans.
Young buyers with nonexistent or limited histories of using credit responsibly often run into the same sorts of problems and find that dealers who work with indirect lenders extend financing where other sources will not. As a result, companies that specialize in indirect automotive lending help many vehicle shoppers obtain the reliable transportation they need each and every year.