back to articles | March 06, 2024 | Moses Mwangi

Categories: Vehicle & Buying Research

Is It Safe to Fill Out a Car Loan Application Online?

Today, the internet has changed the way people do just about everything. From paying bills to shopping for groceries online, it has made people's lives much more convenient.


Today, the internet has changed the way people do just about everything. From paying bills to shopping for groceries online, it has made people's lives much more convenient. Furthermore, car buyers can check out a dealer's entire inventory online, calculate their loan payments using their smartphones, or even apply for an auto loan from the comfort of their homes.

However, with every new advancement that makes our lives easier comes a few risks. Thankfully, internet security measures are stronger than ever, and applying for credit online has become much safer. Yet, some individuals are still reluctant to complete auto loan applications online.

Are you still wondering whether online loan application forms are safe? Here's what you need to know.

What is an online auto loan?

A few decades ago, you had to visit a bank or any other financial institution to ask for a car loan. This was followed by a multitude of forms that needed to be filled out by the potential borrower and then evaluated by the bank or credit union's loan team. The process was time-consuming and could take days or even weeks to complete.

Things are quite different today. Nearly every bank or credit union has an online presence, and most provide information about their auto loans on their website. Many also offer an opportunity to apply for financing online. As a result, an increased number of car buyers are able to complete the entire loan application without even having to visit a bank or credit union branch.

Online auto loans typically work just like a car loan from a bank, credit union, or local dealer. Depending on the lender, you must meet specific credit and income requirements to qualify. However, one benefit is that you won't need to make a down payment. Most online auto loan sites are owned by traditional lenders or work directly with them to offer loans to customers.

Benefits of online auto loans

Auto loans from a reputable online lender can be a great financing option for many, especially those short on time or looking for a lender willing to work with borrowers with bad credit. Here are a few benefits of an online auto loan.

Competitive interest rates

Most online auto loan lenders offer lower interest rates than conventional banks. If you have healthy credit, the APR on a 60-month loan could be up to 2% points less than a traditional bank. While this interest might seem small, it can quickly add up.

For instance, a $25,000 car loan with a 60-month term and a 3.5% interest rate would lead to a monthly payment of around $455. The same loan with an interest rate of 5% would require you to pay about $472 monthly.

Convenience and speed

Applying for an auto loan online is fast and convenient. Provided you have a computer and internet access, you can apply for the loan regardless of the time of day or location. Based on the lender, you might also be able to find out whether you are prequalified within minutes. While you must submit a formal application to be considered for the loan, the lender will let you know the loan amount you can be approved for, the interest rate, and the loan term.

Many lenders to choose from

There are a lot of online lenders out there who are willing to work even with borrowers with poor credit. However, pay close attention to the interest rate and loan terms. Usually, the lower your credit score, the higher the interest rate you are likely to pay on the auto loan. Fortunately, most online lenders have an auto loan calculator on their site to help you understand your monthly payment based on your credit scores.

Drawbacks of online auto loans

Online auto loans have numerous benefits, but they are not always perfect. Here are a few things to consider before you apply for a car loan online.

Interest rates may vary widely

The interest rates offered by most online lenders might be lower than what physical banks offer. However, the rates may still be higher, especially if your credit health is wanting.

Most lenders that offer auto loans to borrowers with poor credit charge up to 25% or more in APRs. According to a report by Experian, this rate is higher than the average auto loan interest rate for subprime borrowers.

Some lenders might be unfamiliar

You will likely encounter online lenders you don't recognize as you research your options. Therefore, do a little digging before you give your personal information to a lender or lending network.

How safe is your personal data when applying for an auto loan online

The first step to securing financing for a new or used car purchase is to fill out an online application form. This can help you get approved for a loan before you walk into a dealership.

In the modern world, banks, credit unions, and other financial institutions offer online application forms for customer convenience. However, how safe is it to give out your personal information online? Here are the steps to follow when applying for an auto loan online.

Understand the federal regulations

The Federal Trade Commission plays a huge role in keeping your data safe online. It regulates how companies can collect, use, and disclose your personal details.

A reputable online lender should adhere to the security protocols outlined in the Federal Trade Commission Act and have security measures in place to keep your data safe. These rules and regulations ensure businesses and organizations only ask for personal information relevant to the products or services they offer.

Be sure to verify that your potential lending company follows the latest security and privacy guidelines when you choose to apply for car finance online. This information is usually displayed on the company's "Privacy" or "FAQ" page. If it isn't there, contact the lender before you enter any private information on their online forms.

Review the website security protocols

Before you enter any information for an online transaction, including applying for a car loan online, review the site's security protocols. Most of your information should be entered in what is known as a secure page. This means your personal information will have an extra layer of security that a regular web page doesn't offer.

The webpage is typically named secure, or you will see the name of an SSL certificate provider. Secure Sockets Layer (SSL) encrypts your data before it's sent to another place on the internet.

One way to know you are entering information on a secure page is when you see a lock image at the beginning of the address bar in your web browser. Another indicator is the https:// prefix on the web address. These checks will help you know whether your potential lender takes security and privacy seriously.

Other safety measures

Of course, the company or organization that handles personal information has to keep the data of their current and prospective customers safe. However, there are several measures you can take to help protect yourself, too. Here are a few things you can do to keep your personal information safe online.

  • Keep all access codes, PINs, and password codes private. Writing these codes and numbers down can lead to trouble, so work on memorizing them.
  • Be careful not to give out your personal details, such as your Social Security Number or date of birth, especially in public places.
  • Keep a close eye on your bank statements and credit card, and report any suspicious activity as soon as possible.
  • Watch out for the links to other sites when shopping for an online auto loan. You can be assured of the protocols on a company's site, but those policies don't automatically extend to third-party links found on the site.
  • Be careful of spoofed or phishing scams. Today's hackers have stepped up their game, and phishing emails can look nearly identical to real ones.

Wrapping it up

Applying for an auto loan online comes with many conveniences, but you need to be wary of unknown lenders. Online auto financing can leave you vulnerable to potential fraud and identity theft.

Vet your potential lenders and get preapproval letters from multiple companies to help you make an informed decision. Also, always fill out applications directly through the lender's website. There are plenty of cyber criminals out there who might send you a false email through your email.