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Auto Refinance

JUN 02, 2022

Lending marketplaces versus auto loan brokers: which is better?



10 min read

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Millions of car owners choose to finance their cars every year. When it comes to looking for the right auto refinancing option, it can be difficult to know where to turn. While some people will look to a broker to find a good deal on a new car loan, others are heading to auto loan marketplaces instead. But which is better? Below, we’ll cover the pros and cons of using a marketplace versus a broker so that you know how to properly compare your auto refinance options.

Cars cost a lot of money. Just short of buying a house, it is usually one of the next biggest purchases you make as a consumer. Financing your car is a great way to break down the cost into affordable monthly chunks. Seeking a refinance could also help you save money and take advantage of better terms and conditions if your financial circumstances change.

Finding the right auto refinancing rates can be trickier than it sounds. There are hundreds of different lenders out there all offering you something different when it comes to term, interest rate, and borrowing options. Assessing the fine print can be a painstaking process. For that reason, it’s easy to turn to a broker who says they can get the right deal for you, but is it really the best deal? How do you know without seeing and comparing the deals and refinancing options yourself? There is a way you can. If you want to size up the deals for yourself, you can use a lending marketplace.

About lending marketplaces

If you have never heard of an auto loan marketplace before, don’t worry. It’s not that complicated. When it comes down to weighing your refinancing options, a lending marketplace is a way of cutting out the middleman and going straight to the source. Marketplaces can quickly match you with established lending institutions. No more friends of friends or shady networks – you’ll be able to compare many different lenders and car loan interest rates to find the option that is right for you. And, when you’re ready, you will be able to accept the offered loan from the lender you choose.

Lending marketplaces are all about connecting the right people to the right offers. Simple as that – but that doesn’t mean that just any lender can start processing car loans on the marketplace. There are vigorous verification standards for marketplace partners, meaning that featured lenders must pass strict vetting and standards before they can be listed on the marketplace platform.

This means you’ll only be in contact with reliable industry experts, from loan officers to business development representatives. So, even if your state has specific lending requirements or laws, marketplaces will still have local experts you can trust who know exactly how to help you with your loan.

About the Caribou lending marketplace

Caribou helps you find auto refinancing options through our partnerships with local and community lenders. Offers are competitive and personalized around your location, vehicle, credit bracket, and current car loan.

Marketplace integrations

Lender connections are not all there is when it comes to finding the best lending marketplace. There are a whole range of features marketplaces also provide including platform integrations designed to make your application experience that much easier.
These marketplace integrations can save you time as well as money. That’s why when you’re comparing refinancing marketplaces, make sure they are connecting securely and automatically with other trusted services.

Marketplace integrations usually include several types of connections. They can include vehicle databases, Department of Motor Vehicles (DMVs), credit reporting bureaus, and internal application programming interfaces (APIs). Each of these connections helps increase the speed of your auto refinance application, takes the leg work out of otherwise manually performed processes, and helps you see qualified savings sooner.

Connecting to vehicle databases helps you import your vehicle information into your refi application. Lenders need to know about the vehicle you are refinancing. These integrations can look up your vehicle specific information by verifying your license plate number or vehicle identification number (VIN) through databases.

DMV integrations are also a significant way to save time and avoid going to the DMV yourself during the vehicle refinance process. When you refinance a car, most states require a specific application to transfer ownership by re-titling the car. This is normally done in person at the DMV. However, marketplaces with the proper integrations can help do this for you.

Automating checks through credit reporting bureau integrations allow you to quickly check your credit history and loan history. You can use these marketplace features to quickly see if you can pre-qualify for a refinance rate – usually within minutes. You can learn more about what pre-approval is and tips to being pre-qualified here.

About Caribou

Did you know the Caribou marketplace has many useful integrations? Our platform securely connects to vehicle databases, credit bureaus, lenders, and more. Make the most use of your time and see refinance savings faster.

We keep our platform as straightforward as possible because when it comes to comparing refinancing options, we know just how frustrating it can be. Our auto loan marketplace is a one-stop-shop that puts you in control of the process.

How does a lending marketplace work?

Auto lending marketplaces work by allowing you to submit your application through the customer application flow. This flow is like a submission form with several pages and steps. This makes them easy to navigate and also walks you through the process step-by-step.
The first step is to start the refinancing application by accessing the online portal. You will need to enter your personal information including details about yourself, vehicle, and your current financed car loan.

This information will then be used for a soft credit check but don’t worry, your credit score won’t be affected at this point. This is to see if you could be automatically pre-qualified for refinancing offers. Some of the lenders on marketplaces set criteria on who can see their refinancing rates, so this soft check is just about making sure you get the offers most relevant to you.

About Soft Credit Pulls with Caribou

To check the refinance rates and terms you qualify for, we conduct a soft credit pull that will not affect your credit score. However, if you choose a loan product and continue your application, we or one of our lending partners will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Once this check is completed, you’re all set to proceed. You’ll be able to see qualifying offers and compare each of them to decide which is right for you. You can see these offers for free with no obligation if you are just checking out the rate options. Keep in mind most lenders certify their offers for 30 days from the time of application so any listed interest rates will most likely be valid up to that point.

When it comes to finalizing your refinanced loan, both marketplaces and brokers have a processing fee to cover paperwork and administration fees. This can be called a processing fee, origination fee, or administration fee. It generally ranges around $400. Keep in mind the refinanced loan savings often more than cover this cost.

Finally, when the auto refinance process is completed, your existing loan will be taken over by the new lender that you have chosen. Lending marketplaces are all about putting refinancing in your hands in a quick and easy to understand process.

About auto loan brokers

If you’ve never used an auto loan marketplace before, you might instead be familiar with brokers. Auto loan brokers are licensed individuals who use their referral network to scout out and secure refinancing options for you. They will usually provide a list of available offers from their network connections. Once you’ve found an offer you want to move forward with, the broker will manually help you through the application process step-by-step.

Auto brokers do take some of the stress and hassle out of the process, but as you can imagine, this doesn’t come for free. Like marketplaces they add administration fees for their time and effort, and you may also need to factor in brokerage fees as well. These could be added onto your refinance package or you may pay the broker separately. Either way, you can bet your bottom dollar those fees will be there somewhere!

When using different brokers, you will notice that the range of options you’re presented with can vary quite significantly since they are network dependent. If your broker has a wide network, they’ll probably be able to find a wider range of different offers for you and there is potential to arrange a better deal from there. But if your broker is more limited, you’ll have fewer options and less negotiating power.

When to use an auto loan broker

Auto loan brokers may be a good option if you can’t find what you need on an auto lending marketplace. You get what you pay for, and a broker with extensive in-depth knowledge can be invaluable – so if you’re struggling to find a better alternative online, it might be time to turn to a broker.

Their lending connections can be handy in certain scenarios. For example, if you have a credit score below 500, it might be better to speak to a broker who is experienced in helping people with subprime credit, or scores between 300 to 500, get their best possible auto refinance deal.

The same goes for the vehicle you want to refinance. Not all cars and trucks will normally qualify, as many lending marketplaces will have limits on mileage and age, so if your vehicle has more miles than usual, like over 180,000 miles, or is more than 11 years old, it might be better to speak to a broker to see if there are any available refinancing options.
It is also fair to say that not every state will have a lending marketplace that works for you. If you can’t access good auto refinance rates this way, you might want to consider a broker.

Ready to start looking at your refinance options? Try Caribou! By using a platform like Caribou, you could save yourself time and money by using a one-stop-shop refinancing platform.

Lending marketplaces versus auto loan brokers: which is better?

So, after looking at what lending marketplaces and auto brokers can offer, what should you go for? Brokers may be better at locating refinancing options when it comes to some unique application situations and challenging circumstances. You could try a broker if you’re struggling to pre-qualify for good refinance rates, don’t have a lending platform that suits your needs in your area, or need a broker with experience of helping people with lower credit or older vehicles.

Other than that, Lending marketplaces are a great choice to start investigating your new loan options. By giving people control over their auto refinancing and offering a seamless way to access great rates, lending marketplaces are an effective way to cut out the middleman and go straight to the best lending offers out there. Whatever you decide, make sure you are fully informed and have considered all options.

Keep learning

Learn about the auto refinance application steps

Understand auto refinancing better

Calculate refinance savings

Through Caribou, you could start saving today!

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Contact Details
NMLS #1746612

Mon - Fri: 9am - 8pm EST

Sat - Sun: 9am - 4pm EST

1717 Rhode Island Ave, NW, Suite 500 Washington, DC 20036

Caribou Insurance Services, LLC
Mon - Fri: 9am - 8pm ET

* This information is estimated based on consumers who were approved for an auto refinance loan through Caribou on or after 1/1/2022, had an existing auto loan on their credit report, and accepted their final terms. As of 4/30/2022, borrowers who refinance save an average of $101.54 per month. Refinance savings may result from a lower interest rate, longer term, or both. There is no guarantee of savings. Your actual savings, if any, may vary based on interest rates, the repayment term, the amount financed, and other factors.

+ To check the refinance rates and terms you qualify for, we conduct a soft credit pull that will not affect your credit score. However, if you choose a loan product and continue your application, we or one of our lending partners will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

++ Social security number is required should you choose to move forward in the loan application process.

** APR is the Annual Percentage Rate. Your actual APR may be different. Your APR is based on multiple factors including your credit profile and the loan to value of the vehicle. APR ranges from 3.49% to 36.00% and is determined at the time of application. Lowest APR is available to borrowers with excellent credit and only in certain states. Advertised rates and fees are valid as of 7/21/2022 and are subject to change without notice. Lowest rate of 3.49% APR only available with up to 36-month repayment term. Insurance savings will not result from lower APR.

Terms and Conditions apply. Caribou reserves the right to modify or discontinue products and benefits at any time without notice. Participating lenders, rates and terms are also subject to change at any time without notice. The information you provide to us is an inquiry to determine whether our lenders can make you a loan offer. If any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. We do not guarantee that you will receive any loan offers or that your loan application will be approved. If approved, your actual rate will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Offers not available in MA, MD, MS, NE, NV, WI, WV.

Insurance products offered through Bindable and Caribou Insurance Services, LLC. Caribou is working with Bindable who owns MyLifeProtected and MassDrive Insurance Group, LLC, the licensed agent for all products.

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