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31 July, 20:55

How are direct lending and dealer financing similar? And which is the better option?

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  1. 31 July, 21:28
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    See explanation below for answer.

    Explanation:

    Direct lending is the provision of credit directly to small and middle market companies (SMEs) for growth or acquisitions.

    Dealer financing refers to the type of loan which is originated by a retailer to its customers and then sold to a bank or other third-party financial institution. The bank will then purchase these loans at a discounted rate and then collect the principle and interest payments from the borrower. It is also known as indirect loan.

    The similarity between both methods is the lendee agrees to repay the loan over a period of time plus a finance charge.

    Direct lending is the better option when the dealership offers no incentive programs.
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