Of all the companies advertising online auto lending, very few are direct lenders. Of the top 50 results returned on Google search engine for the term 'auto loan' in July 2003, only 5 provide at least some auto financing products directly, referred to as "direct lending". The others are middlemen - loan brokers and companies that generate leads by taking your application, and selling it to other brokers and direct lending companies.
Direct lending is a loan by a lender without a middle man. This enables the direct lender greater discretion in making loans. The direct lending application is very similar to indirect lending.
For direct lending, an online loan application is completed by you via the Internet. The application is transmitted to the direct lending company's automated application processing system, and within seconds, a credit bureau report is accessed and a credit score is computed.
Based on this information, the direct lending company's proprietary automated underwriting system approves or declines the applicant and the decision is electronically sent to the applicant. The direct lending company's underwriting and collateral guidelines as well as proprietary credit scoring parameters form the basis for the credit decision.
All credit decisions made via the direct lending company's automated application processing system are valid for a 45-day period. Declined applicants are provided with appropriate notification of the decision.
The applicant and dealer complete the loan package and submit the package to either the direct lending company or its online lending partners for funding. Direct loan packages received directly by the direct lending company are processed in a manner similar to indirect loans. In the case of loans originated through one of the direct lending company's Internet partners, the dealer deposits a documentary draft that is presented to the partner for funding. Once cleared for funding, direct lending company electronically transfers funds to the partner and purchases the loan.