WHY DO YOU NEED TO GET PREAPPROVED FOR A CAR LOAN?
You don’t need to get preapproved for a car loan if you can pay the
full price of a car with cash. But the reality is most of us will
have to finance a car purchase.
The problem, though, is it’s difficult to determine whether you’re
being offered a good deal. This is where an auto loan preapproval
can help you.
Getting preapproved for a car loan can be accomplished online. You
can find a lot of banks, credit unions and lending companies
offering competitive auto loans via the Internet.
The attractive interest rates advertised, however, are often
reserved for people with stellar credit.
If you have less-than-perfect credit, expect to be offered higher
interest rates and stricter terms. But find lenders that specialize
in bad credit financing because they are willing to take customers
like you into their financing programs. Get in touch with them to
see what kind of interest rate you can get approved for.
If you are buying a used car, the preapproval requirements are
different. Most lenders require their borrowers to purchase from a
franchised dealer and not from an independent dealership or private
seller. The vehicle to be financed must also meet certain age and
In any case, you will know upon approval the maximum amount you can
borrow and the interest rate you will get. These are two important
things you need to know as you shop around for the best car
Getting Approved for the Best Rate
An auto loan preapproval is not a special kind of loan. It is simply
a term used to refer to the process of arranging auto financing
before shopping for a car.
So getting preapproved for an
is just like applying for a car loan. You need to complete and
submit an application form and comply with all the requirements.
But don’t get preapproved for just any auto loan. Find the best one.
There are at least two important things you need to do in order to
- Get a copy of your credit report at least 3 months before applying
for financing. Every citizen in the U.S. is entitled to one free
copy of their credit report through AnnualCreditReport.com. The
three-month window is for reviewing your credit report and
correcting any inaccuracy you may find.
- Compare offers from at least 3 different lenders. Banks and credit
unions have the most competitive rates most of the time. But lending
companies are sometimes more competitive. Make sure to check out
rates from various lenders.
How Does Auto Loan Preapproval Help You?
- IT HELPS YOU NOT OVERPAY. As mentioned earlier, an auto loan preapproval lets you know how much you can borrow. It helps you
stick with your budget. So if you are approved for $25,000 loan
amount, you should choose a vehicle that costs less than that.
- IT MAKES NEGOTIATION SIMPLER. By arranging financing before
stepping into a dealership, you eliminate the need to discuss auto
loans with the dealer sales rep. You can then focus on negotiating
for a lower car price.
- IT SPARES YOU FROM THE F&I HASSLE. If you let the dealership
arrange financing for you, the sales rep will ask you to wait in the
Finance and Insurance office for several hours while they find you a
loan. You wouldn’t have to stay this long at the dealership and
experience all the inconvenience that comes with it when you are
already approved for an auto loan.
- IT KEEPS YOU SAFE FROM SWINDLERS. There are a lot of abusive
lenders in the industry. You’ll be able to guard yourself against
them when you know the status of your credit and the kind of
interest rate you are approved for. Scam artists prey on the
ignorance of borrowers. Don’t let yourself be a victim by getting preapproved for a loan.