what is an indirect loan 
an indirect loan can refer to an installment loan in which the lender either the original issuer of the debt or the current holder of the debt does not have a direct relationship with the borrower indirect loans can be obtained through a third party with the help of an intermediary loans trading in the secondary market may also be considered indirect loans by allowing borrowers to obtain financing through third party relationships indirect loans can help to improve funding availability and risk management often applicants who don t qualify for a direct loan can opt for an indirect loan instead indirect loans tend to be more expensive carry higher interest rates that is than direct loans are understanding an indirect loan dealer financing many dealerships merchants and retailers that handle big ticket items such as cars or recreational vehicles will work with a variety of third party lenders to help their customers obtain installment financing for purchases dealerships often have lending networks that include a variety of financial institutions willing to support the dealership s sales oftentimes these lenders may be able to approve a wider range of borrowers due to their network relationship with the dealer in the indirect loan process a borrower submits a credit application through the dealership the application is then sent to the dealership s financing network allowing the borrower to receive multiple offers the borrower can then choose the best loan for their situation the dealership also benefits in that by helping the customer receive financing it makes the sale because the interest rate on the dealer is likely to be higher than from a credit union or bank it s always best for buyers to check other financing options before agreeing to finance their car through a dealer while this sort of indirect loan is often known as dealer financing it s actually the dealer s network financial institutions that are approving the loan based on the borrower s credit profile setting its terms and rates and collecting the payments although an indirect loan is offered through a dealer or retailer the consumer is actually borrowing from a separate financial institution 