Personal loan online application

BORROWING | Take a pass on ONLINE AUTO LOANS with high interest rates.

THE INTERNET has been a boon to car shoppers, offering an arsenal of information to arm you in the battle to find the right vehicle at a fair price. So how is the virtual world when it comes to financing a new car? There are plenty of online auto-loan sites, but don't expect to find the best deal there. You're likelier to get a lower rate from the automaker's captive finance company. Credit unions and some banks may cut you a better deal, too.

For example, PeopleFirst.com, a major online lender, recently advertised rates "as low as 7.29% for 12- to 36-month loans." At the same time, Ford was offering rates as low as 4.9% for 36-month loans on certain cars, and some GM deals dipped as low as 1.9%. Buyers of some Chrysler models were getting 0% financing. Foreign manufacturers, including Isuzu, Subaru and Volkswagen, also undercut online lenders with deals that ranged from 0.9% to 6.9%.

Credit unions can be very competitive. For part of last year, for example, the Spokane Teachers CU was offering 0% financing, and Cal State 9 CU members could get 6.9% financing for 36-month loans. "What that shows," points out Greg McBride, a financial analyst for Bankrate.com, "is there's certainly an incentive to shop around."

High rates of rejection. While surfing for an e-loan may seem to simplify car-loan shopping, it's often not a smooth process. Nearly two-thirds of all would-be borrowers are turned down, according to Art Spinella of CNW Marketing Research, in Bandon, Ore. "Rejection rates for online loans are high because most of the people applying for them have lousy credit," he says. "As a result, the online companies' loan rates are higher than those of many traditional lenders."

Three-year e-loans typically run about 7.3% for the best-rated applicants and some three percentage points higher for average to fair credit risks. The riskiest borrowers may pay up to 21%, if state usury laws allow it.

To get a loan, you file an application electronically, and if you are approved you receive your loan in the form of a check you can write to a dealership--up to a maximum amount. Dealerships, which can profit handsomely from their own financing, may balk at such a payment.

That's what happened to Ong-Lee Liu of Daly City, Cal. Anxious to purchase a new car, she applied for financing from E-Loan and quickly received a check for the purchase of a Volkswagen Jetta GL. But the VW dealership refused to accept E-Loan's check and persuaded Liu to finance the car through the dealership.

Bottom line: You won't get hurt checking out online auto-loan deals, but you risk overpaying if you don't check out the old-fashioned competition, too. --Reporter: KATHY JONES

Borrowing Average rates for home and auto loans

These rates are national averages as of December 8, 2000, and assume a 20% down payment for mortgages. For daily updates and to search for the best deals available to you, please visit our Web site at www.kiplinger.com.

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