Getting pre-approved for a car loan is kind of a big deal. Doing so can give you a better understanding of how much you will be able to borrow in your journey to buy a car. What’s more, a pre-approval can also give you greater flexibility in which car dealer you ultimately choose, which in turn can save you money in the long run.
As you can see, getting pre-approved matters. In this guide, we’ll cover more benefits of getting pre-approved, so you know what to expect from your car buying experience.
What Exactly Is Pre-Approval?
In a nutshell, getting pre-approved means that the lender deems you safe to loan money to. Before you are pre-approved for a car loan, you will typically need to provide your lender with specific documentation.
This usually includes financial, personal, and employment information. This data is needed before you will even be able to be considered for a car loan pre-approval. What’s great about this part of the car buying process is that, depending on the lender you’ve chosen, you could get a decision back within minutes.
A car loan pre-approval is conditional approval. Your lender will give it to you with an estimated term, such as how much money you will be allowed to borrow, the interest rate, as well as the loan term.
This car loan quote is designed in a way that makes it much easier for you to estimate the total cost of your loan. But that’s not all. You can use this information to create a financial budget before you ever start car shopping.
An auto loan pre-approval also lets dealers know that you are a buyer who understands the car buying process and is well-informed. Sadly, car dealers don’t have the most scrupulous history. It isn’t uncommon for people to be taken advantage of. It’s safe to say that is more likely to happen if you are clueless about car buying and what goes on behind the scenes.
There are lots of tricks dealerships use to make the most money possible. Is this legal? Yes. Is it right? It depends on who you ask. But for people like you who just want to get a good deal on a car, you’d rather not have to bother with underhanded sales tactics.
You can be sure to at least lessen this by showing the sales team that you know what you’re talking about. In turn, you will have some negotiating power on your side and are likely to get a better deal on your new ride.
Fortunately, getting pre-approved for a car loan is relatively easy and straightforward. If you come prepared and have all of the necessary paperwork and respectable credit, you can look forward to a painless process.
Benefiting from Pre-Approval
If you’ve had your heart set on getting a car and are growing increasingly excited to get your hands on one, take a moment to slow things way down. Many car buyers make the mistake of running to their nearest car lot and buying the car of their dreams without paying attention to the fine print or even negotiating the final sale price.
What ultimately ends up happening is more money is spent than what is necessary. The jubilation of finally getting in the driver’s seat clouded the buyer’s judgment and cost them extra. It’s a common occurrence, but fortunately, one that you can avoid.
You see, when you are pre-approved, you have buying power in your hands that you can use to your advantage. As you shop for the right car and the right price, use your pre-approval to help you get the best deal possible.
Since you have a ballpark of your price range, you can now wisely compare vehicles within similar price ranges. From there, you can research your top choices online to see what common concerns there are if any.
Check over reviews from people who actually own the cars you are considering. Use this information to determine which is the better fit for your needs. Don’t forget to check the history, too. This will let you see how well a car fares over time and whether it’s worthy of your consideration.
You wouldn’t have this luxury without a car loan pre-approval. Sure, you can always check out any car you want, but a pre-approval lets you narrow down the ones in your buying range, so you’ll know what you’re capable of affording with your loan.
Having a pre-approval also makes it a lot easier to safely budget that car into your spending. This is a huge advantage because you can effectively make adjustments to your budget. In doing so, you can ensure that you buy your car more comfortably without taking funds from other important responsibilities.
It’s important to keep in mind that you don’t necessarily have to apply for the most amount of money offered to you by the lender. In fact, after you have considered all of the extra expenses associated with your new car, such as insurance and fuel, you may find that you need to borrow even less.
As we touched on a moment ago, pre-approval gives you negotiating power. Without pre-approval, you may not have any recourse but to take whatever financing option the lender offers to you. This happens a lot, as well, leaving buyers feeling pressured into accepting terms and rates they know they can’t afford.
You, on the other hand, are in a much better position when you walk in with a car loan pre-approval, and dealers know it. As such, use it to your benefit. But be cautious. Don’t get a big head thinking you can demand outlandish deals.
Be respectful and work with the dealer, but know your financial limits. If a car dealership is really serious about earning your business, they will more than likely work with you. If they don’t, that’s the great thing about being pre-approved.
You can’t take your business elsewhere and probably get a better deal. You have much more options on the table with a pre-approval.
Not sure what you need to get pre-approved for a car loan? We’ve got you covered. One of the best things you can do for yourself is to check your credit beforehand. If your credit isn’t the greatest, it’s better to work toward improving your credit score before going in for a car loan.
Your interest rate will be higher, and you may have a hard time comfortably paying back your loan on time. Of course, not everyone is in a position to do that. If you need a car right away, you’re going to need to gather up some information first.
When you go to a lender, they will want to know some basic things about you. This usually has to do with your employment, income, and credit history. You can speed the process along by bringing your Social Security Number, driver’s license, income, and employment status.
It’s important to know that some lenders perform a hard credit check right then and there. By doing this, your credit score will be affected. If you can’t afford to take a ding on your score, you might want to go elsewhere and try another lender.
As such, always ask the lender upfront whether they perform a hard or soft credit check. A soft one won’t affect your score like a hard credit check.
At this juncture, you will fill out an application and turn it in. In most cases, you’ll get a response back in a matter of minutes, letting you know whether you are approved or denied.
If you get denied the first time around, don’t get discouraged and give up. It’s always best to get several offers anyway, so get out there and speak with multiple lenders about what your options are.
The same applies to car dealers. Don’t take the very first offer presented to you. Always negotiate and see what the best deal is that you can get. You may be surprised to learn that you can get the car you want at a price you are happy with. But you won’t know until you ask the dealer.
Here at Seek Capital, we want you to know all that you can about saving money and improving your credit. We invite you to head on over to our blogs page for more information. There, you will find a valuable resource of articles that cover everything from home loans to credit cards and much, much more.
As always, if you have any questions about loans, don’t hesitate to reach out to us right away. We will be happy to assist you in any way that we can.