An indirect loan is a type of loan where the borrower obtains financing from a third party, typically through a dealership or intermediary. The lender does not have a direct relationship with the borrower, with the intermediary acting on their behalf to arrange the loan.

Indirect loans are an increasingly popular form of financing, especially in the auto industry. Auto dealerships in particular will help their customers by working with various lenders to obtain the best loan rate and terms that the buyer qualifies for. This is especially helpful if the buyer has a limited credit history, since many traditional banking institutions may not approve them for a loan.

These loans can be more expensive than direct loans, as there are additional fees associated with the intermediary approving and managing the loan. Because of this, borrowers should consider all their options, including getting a direct loan from their bank, before applying for an indirect loan.

It is important to note that not all dealerships are able to offer indirect loans. Be sure to research the dealership and the financial institution offering the loan to make sure it is reputable and offers the best terms available.

In addition, be sure to read any documentation associated with the loan carefully. These documents should clearly explain the terms and conditions of the loan, including the interest rate, loan amount, and number of payments. Understanding and agreeing to these terms before signing is essential for avoiding unexpected costs and debt problems in the future.

Overall, indirect loans are a great option for buyers who may not qualify for a traditional loan or who don't have the time to shop around for the best rate and terms. Being aware of the associated fees and making sure to look over all of the documentation carefully are key to making sure that the loan is in the best interest of the borrower.