How to Get an Auto Loan in 2021

How to Get an Auto Loan in 2021 | Carnomaly

If you own a car, chances are you’ve been there.


By “there,” we mean the car dealership’s financing office. After the thrill of browsing the lot, test driving every car in your budget (and at least a few that aren’t), and finally picking your new ride, what comes next can come as quite a shock to the unsuspecting car buyer.


First, there’s the haggling. Everyone knows not to show too much interest in front of the salesperson. After all, the only way to effectively negotiate is to appear to be willing to walk away with nothing. But after hours of the roller coaster of test drives and back-and-forths with the “supervisor” in the back (who you probably never even saw), let’s face it – you’re already emotionally invested in this process.


You know it. The salesperson knows it. The supposed “supervisor” in the back knows it, too.


You’ve finally talked the salesperson into giving you their best deal ever. Congratulations! But your work isn’t done yet. Far from it, in fact. Unless you happened to walk into the car dealership with a wad of cash, chances are you’ll now need to contend with the banks and the financing office at the dealership.

How do you get an auto loan in 2021? | Carnomaly

Settle in and pour yourself some coffee because this part of the car-buying journey alone can take several hours. It’s now time to hand over all manner of highly personal information and wait for the banks to determine whether they deem you worthy of a loan or not and just how much you’ll need to pay them for the privilege of owing them money.


Assuming you pass that particular test, you’ll now come face-to-face with the real cost of that new or new-to-you car.


Suffice it to say, the car buying process so many of us are familiar with isn’t always an enjoyable one. But is that truly the only way to go about it?


The answer is no. There are other ways to purchase a car and other methods for securing a car loan. In this article, we’ll compare the different types of car loans available – including some lesser-known methods for financing a vehicle – and break down how to get an auto loan in 2021.

U.S. Auto Loans by the Numbers

 The auto loan industry in the United States is an absolute beast that shows no signs of settling down. In fact, in 2021, Americans are taking on a record-setting amount of auto loan debt and holding onto it for more extended periods.


Americans currently owe just about $1.4 trillion in automotive loan debt – that’s 5% of the total American consumer debt. Car buyers in the United States take out 2.3 million auto loans each month worth around $56 billion. 


Perhaps most disturbingly, Americans pay an average of $769 to $895 to lenders like banks and credit unions every single year.

Americans currently owe just about $1.4 trillion in automotive loan debt

That's 5% of the total American consumer debt.

Types of Auto Loans

Not all auto loans are created equal. When determining how to get an auto loan for your next ride, it’s essential to learn a bit about the options available to you. In fact, it’s important to remember that you do, in fact, have options at all.


Let’s take a look at some of the most common types of auto loans – traditional and special financing – and compare them to a newer but proven method for financing a vehicle called DeFi Auto Loans.

Traditional Auto Loans

When most people think of auto loans, they think of traditional auto loans. These loans are usually secured loans, meaning a loan is granted with a lien on the vehicle that is being purchased. Should the borrower default on the loan, the lender can repossess the vehicle.


The interest rate, like most loans, will depend on the borrower’s credit score. But besides credit score, there are other factors that can determine both a buyer’s eligibility for a loan as well as the rates.

A few of these factors include:

Vehicles for Sale | Carnomaly offers DeFi Auto Loans

While the first three you probably already considered, many buyers don’t realize that dealers often tack on additional percentage points on top of the lender’s interest rate. That’s money that’s going right to the dealer’s bottom line. While buyers can sometimes negotiate this down, it can add a significant cost on top of their auto loan if they happen to be unaware.


Traditional auto loans can also come in several other forms like unsecured loans, balloon loans, and home equity line of credit (HELOC), among others.


While all of these auto financing methods vary in their typical use cases and eligibility criteria, the common denominator is that the banks, credit unions, and dealerships are the ones who stand to benefit the most from your business.

DeFi Auto Loans

One type of auto loan that many are turning to in 2021 is DeFi lending, and it’s threatening to upend the dominance of centralized banks in the auto lending space.


If the thought of a more transparent, equitable process for securing an auto loan is appealing to you – or perhaps you’re not too keen on big banks pocketing your interest – then read on. DeFi auto loans might be right up your alley.


The critical difference between traditional auto loans and DeFi auto loans lies in who funds the loan, who profits from the interest you pay, how your eligibility is determined, and how you pay for your vehicle.


DeFi (Decentralized Finance) lending is a type of financing that operates in a decentralized manner thanks to blockchain technology. Since there are no centralized authorities like banks that control the loan, DeFi lending is, in essence, a peer-to-peer method for borrowing and funding loans.

DeFi Auto Lending Circumvents Traditional Lenders | Carnomaly

It operates as both a way to secure an auto loan as well as an investment opportunity for those who choose to fund loan pools.


One of the most attractive qualities of this newer type of auto lending, of course, is that it gives borrowers the ability to pay for their new or used vehicle with cryptocurrency.

How to Get a Defi Auto Loan

The process of securing a DeFi auto loan through CarrDefi is highly streamlined and much more straightforward than applying for a car loan through your bank or dealer.


Here’s how it works:

Choose Credit or Asset-Backed Loans

With DeFi auto lending, borrowers choose between credit or asset-backed loans. That means that DeFi lending is an accessible way for borrowers to overcome many of the barriers often present in traditional lending. In short, you can get a car loan regardless of your social status, education, credit, or other factors.

Tiered Lending Allows You to Level Up Your Loan (And Level Down Your Interest Rate)

As you make regular payments on your loan, you become eligible to move into more favorable lending pool tiers that may offer lower interest rates.


What kind of auto loan is right for you? | Carnomaly

Which Type of Auto Loan is Right for You?

Just because an industry hasn’t changed in decades doesn’t mean it has to be our only option. DeFi auto lending promises to be a major disruptor of the often tired world of traditional auto financing – and one that borrowers can feel good about participating in.


Choosing the right way to get an auto loan in 2021 is a highly personal decision that depends on many different contributing factors. But with blockchain technology and cryptocurrency promising to become the foundation upon which future financial systems will be built, it just makes good sense to learn more about DeFi auto lending before purchasing your next vehicle.


Besides, are you really looking forward to that hours-long negotiation with your local dealership’s sales office?


We didn’t think so.

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