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 mileage requirements.
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 financing offer.
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 auto loan 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 achieve that:
- 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.