Thursday, May 2, 2024

How Does Pre Approval For Car Loan Work

Don't Miss

Negotiate At The Dealership

How to get Pre-Approved for an Auto Loan.

Another benefit of having a pre-approval is that you can negotiate with the dealer to get the best pricing for your vehicle.

When you have a pre-approval, you act as a cash buyer, which gives you more freedom and flexibility with your purchase. The dealer will know that you can take your financing elsewhere if you dont find what you want and will strive hard to make the sale.

You Know How Much You Can Spend

If you’re in the market for a new car and know youll need to finance it, your first step should be applying for preapproval with your bank or credit union. It gives you an edge because before you even visit a dealer, youll know how much you can finance, your estimated interest rate, how long you’ll have to pay back the loan and an estimate of your monthly payment. That’s powerful knowledge, because you won’t waste your time on vehicles that arent a match.

Questions To Ask Your Lender Or Broker When Getting Preapproved

When getting preapproved, ask your broker or lender the following:

  • how long they guarantee the preapproved rate
  • if you will automatically get the lowest rate if interest rates go down while youre preapproved
  • if the pre-approval can be extended

Ask your lender or broker about anything you dont understand.

Read Also: How To Get Low Interest On Car Loan

Start Looking For Car Loans Today

Once youve laid out your monthly budget and figured out how much youd like to spend per month and in total on your vehicle, you can start looking for loans.

At Baton Rouge Telco, we offer a wide range of auto loans with competitive interest rates. We have experts on staff to help you work through the details of auto loans, so you wont be alone through the process.

Understanding Auto Financing Is Essential

How Do Pre

If you think of your car loan as something that you purchase just like you are buying anything else, it should put the importance of understanding auto financing in perspective. In the case of a car loan, you are purchasing the use of money now that you will re-pay over time. Very few people can afford to buy a new vehicle with cash. So the auto industry makes it very easy for them to borrow money. In fact, the entire auto industry runs on credit.

Let’s say you’re going to buy a $35,000 car, and your current vehicle is paid for and worth $15,000. If you trade it in, you need to come up with $20,000 to complete the purchase. If you don’t have the cash, borrowing the money is the answer. If you have a decent credit history, many companies will eagerly lend you that $20K. But it takes some effort to get the best loan terms available.

Some sources of auto financing are less expensive than others. Your job as an online car loan shopper is to find the one that is the least expensive for you. And it is useful to do that before you enter into any kind of online buying process, including with apps like Carvana, Shift, and Vroom. Since dollars are dollars, you don’t have to worry about the quality of the product you are buying. You simply need to compare the price of that product in other words, the terms of the loan.

Also Check: What Kind Of Loan For Rental Property

Check The Kind Of Credit Score You Need To Buy A Car

Whats your credit score? Find your credit rating before applying for a car loan. The best car loan rates are reserved for borrowers with the highest scores. So a higher credit score means youll enjoy the best auto loan interest rates and also more favourable terms.

If you check your credit before applying for a car loan and your credit score is low, youll have time to improve your credit score and boost your chances of qualifying for the best car loans. According to, a score of 719 or more for a new car or 655 or more for a used car is the best .

Now is also a good time to check your credit history for any errors or issues that could negatively impact your credit score and prevent you from getting the best auto interest rates. In Canada, check your credit score through Equifax Canada or TransUnion Canada by mail. If you prefer, you can pay a small fee to order it online to get access to the information faster. Once you get this information, you can estimate your average car loan rate based on your credit score.

What Are The Next Steps After Getting Pre

Once you have been pre-approved the next step is to provide your supporting documentation for the final car loan approval process.

This will include:

  • A copy of your drivers license

  • Payslips

  • Bank statements

Once the vehicle has been secured, we will contact the dealership and obtain an invoice for the vehicle.

At that time, a final assessment will be conducted and a final approval granted. You will then receive an electronic copy of your loan contracts to be signed and returned. We will then pay the loan funds to the car dealership directly. You are then free to drive away!

You May Like: Can You Use Va Loan For Renovations

What Information Youll Need To Apply For Prequalification

Getting prequalified for a loan is similar to getting approved for a loan. Lenders typically require your personal information and a soft credit inquiry.

For personal information, lenders will usually want to verify the following:

  • Income
  • Identity
  • Current debt obligations

Itll probably also be handy to have your Social Security number, drivers license, proof of income and housing payments.

To check your credit, the lender may use a soft inquiry or a hard inquiry to pull your credit reports and scores. A soft inquiry doesnt affect your credit scores, while a hard inquiry may have a small impact on your credit scores. So if youre shopping around for the best rate, check if youre dealing with a soft or hard inquiry first.

And remember, multiple inquiries made within a 14- to 45-day window often count as only one inquiry, depending on the credit-scoring model, so you can try to get a better rate while minimizing the effect on your credit scores.

About How Much Can I Borrow

Navy Federal Auto Loan Pre-Approval Process

When you apply for and receive pre-approval, youll be able to set realistic expectations about how much youre able to afford. The lender will give you a quote for the maximum amount youre eligible to borrow, and that may include more than just paying for the car, including taxes, the title, and any additional fees.

Additionally, you can arrive at the dealer having already reviewed the terms of the loan, including the interest rate involved and any pertinent information. Being prepared in this capacity before arriving on the lot makes it so youre able to pay attention to the most important component in the whole transaction: choosing the right car for you and your needs.

You May Like: How Long Until You Can Refinance An Fha Loan

Research The Best Auto Loans

Whats the best bank to get a car loan from in Canada?

If youre set on giving your business to a financial institution like a bank or credit union, the best bank for car loan options is the one that already knows you. Start with the bank where you do your own banking, and have bank accounts, a credit card, or other products. If you dont already have a favourite bank, look for local banks offering car loan specials.

Although many Canadians ready to buy a new car will meet with their local banker at their neighbourhood branch, others might visit a banking officer recommended by a friend or family member.

Keep in mind that applying for a car loan through a bank often means booking an appointment, meeting with a personal banker or loans officer, filling out paperwork and providing all requested financial documentation. You then might have to wait for a day or longer before learning whether your car loan was approved. Its also unlikely that you will have the chance to negotiate the interest rate offered.

Strengthens Your Negotiating Position

If you have a preapproved auto loan, you can ask the dealer to beat your preapproved APR. Tell them the rate you received from a direct lender and ask if they can do better. Dealers can get a business referral fee from lenders for connecting them with customers. Even if they cant inflate your APR, dealers want you to take one of the loans they arrange. Dealerships have a wide network of lenders they work with daily and they can likely find a lower rate for you. By doing this, youre making the dealer sweat and work for you.

Don’t Miss: Where To Apply For Student Loan Forgiveness

How To Get Pre

Follow these steps to apply for pre-approval on a car loan:

  • Determine how much you want to borrow. You dont need an exact number at this point, but youll want to have a ballpark figure to share with potential lenders.
  • Prepare your documents and information. Youll likely need the following to complete your pre-approval application:
  • Residential address
  • Employment information, including place of employment and gross monthly income
  • An estimate of how much youd like to borrow and your desired loan term
  • Fill out the application. You can generally fill out a pre-approval application online by visiting the lenders website and searching for this option. If your lender does not offer online applications, youll have to visit their branch or office and fill out an application in person.
  • Start shopping! If you get pre-approved, youll typically have 30-60 days to shop for a car before the pre-approval expires.
  • What Are The Requirements


    The advertised interest rates you’ll see on websites are usually reserved for those with good credit. If you have poor credit, however, there are still options. Lenders such as myAutoloan or SpringboardAuto will lend to consumers with bad credit scores. The rates will be higher, but at least you’ll know what you can afford. NerdWallet has compiled a list of online lenders that focus on people with poor credit.

    If you haven’t looked at your credit score in a while, it is a good idea to do so. This will let you know what to expect when you’re applying for a loan. All consumers are entitled to one free credit report per year.

    Also Check: What Is The Best Debt Consolidation Loan Company

    Get There Faster With Greater Texas Credit Union

    Getting auto loan pre-approval is a great first step towards securing your next vehicle, but it is by no means the last one youll need to take.

    With so many steps along the way, trust Greater Texas Credit Union to get you out of the lot and onto the road faster. Our team of experienced lending professionals is equipped to guide you through your next vehicle purchase and beyond.

    Want to do more research about your next steps in the car buying process?

    Can I Sell My Car With A Loan

    It is possible to sell your car with an outstanding loan, but you may have to go through a few extra steps. If your car is worth less than what you currently owe on the loan, you have what’s known as negative equity meaning you may need to pay the difference out of pocket or refinance the remaining amount with a different type of loan.

    If your car is worth more than what you currently owe, on the other hand, you may be able to pocket the difference in cash when you sell the car. Whatever your situation, reach out to your lender about your options, as each lender sets different rules for selling a car with a loan.

    You May Like: How Much Construction Loan Can I Get

    Let Us Help You Get The Car You Deserve

    While you ponder which institutions you need to go through for your auto loan, how about we offer you a chance to borrow the cost of your future car despite your bad credit history?

    If you partner with, you will find that getting a car loan for bad credit, no credit or good credit has never been easier. All credit scores are welcome for our services and we can help you get an auto car loan in just 60 seconds!

    Visit today to research current car loan rates, touchless car loans, online car loans and so much more.

    How Do Car Loan Preapprovals Affect Your Credit


    Car loan preapprovals trigger a hard credit inquiry when the lender checks your credit, which could knock your credit score a few points temporarily. The good news is most credit scoring models allow consumers to shop around for auto loan rates without seriously damaging their credit scores. Multiple hard inquiries for auto loan preapprovals are generally treated as a single inquiry by scoring models if they occur within a 14-day window.

    Having a preapproval letter does not guarantee you’ll get approved for a loan. If there are changes in your finances between when you are preapproved and when you apply for the loan, you could ultimately be declined. One instance where this could occur is if you were to lose your job during the application process.

    You May Like: How To Calculate Bank Loan

    A Pre Approved Car Loan Can Mean A Better Experience

    When you get a pre-approved car loan, you will find that your car buying experience is greatly improved. You know how much you can afford and can avoid the hard sales tactics and markups dealers are known for. Having a plan in place regarding the type of vehicle you want and can afford is a major benefit.

    Are you ready to get pre-approval for your next vehicle?

    You Can Shop Like A Cash Buyer

    When you walk in the door armed with a preapproval, you have the upper hand because you can shop just like a cash buyer. Youll have more power to negotiate because you’ll know your absolute maximum price, and you’ll be able to negotiate price and not payments. That can save you some serious money. How? Because if you try to pick a monthly payment, you could end up with longer terms at a higher interest rate, which means you could end up spending more for the car in the end.

    You May Like: Can You Pay Off Mortgage With Home Equity Loan

    Freedom To Find Another Dealer

    With an auto loan preapproval, you can act as a cash buyer. Rather than being tied to the one dealership where you did a credit application with its particular lender partners, you can comfortably check out multiple dealerships if you want. An auto loan preapproval is portable.

    Image Credit:

    Getting Preapproved For An Auto Loan Before You Walk Into A Dealership Helps Put You In The Drivers Seat During The Car

    How Does Getting Preapproved For A Car Loan Work

    A preapproval is conditional approval given to you from a lender with estimated terms such as the amount of money you can borrow, the interest rate and loan term to finance the purchase of a car. This loan quote makes it easier to estimate the total cost of the loan and to create a budget before you start shopping.

    A preapproval is a great way to let dealers know youre a buyer whos done your homework. Also, if you get preapproved, you wont necessarily have to rely on dealer financing. This could give you greater negotiating power at the dealership, which can make the car-buying process less stressful.

    Getting preapproved for an auto loan can be an easy process if youre prepared with the application documents you need and have healthy credit. Lets explore what you need to do to help get preapproved, how it can benefit you and what you might want to consider if you dont get preapproved.

    Also Check: What Is Interest Rate For Commercial Loan

    Myautoloan: Best For Shopping For Multiple Loan Offers

    Overview: If you want to compare multiple loan offers but you dont want to spend a lot of time doing it, myAutoLoan is a great option. This platform lets you enter your information once and receive multiple loan offers in one place.

    Perks: After filling out a single online loan application, youll be given up to four quotes from different lenders. To qualify, you must be at least 18 years old, have an annual income of $21,000, have a FICO score of 575 or greater and be purchasing a car with less than 125,000 miles and that is 10 years old or newer. By comparing multiple auto loan offers at once, you can pick the one with the interest rate, loan term and conditions that work for you and your budget without having to shop around.

    What to watch out for: If you have poor credit, your interest rate could be on the higher side. Also note that you can use this platform if you live in most states, but not in Alaska or Hawaii.


    Submit Your Car Loan Application

    Most banks that offer car loans accept both walk-in and online applications. You can submit your accomplished application form and supporting documents at the nearest branch. A more convenient option is using the banks online facility for car loan application. If youll apply online, youll have to scan or take photos of your documents and upload the images on the banks website.

    Also Check: How To Calculate Vehicle Loan Payment

    Know Your Credit Rating

    Shopping for a car loan online is simple, and it would be even simpler except for one big thing: When you are borrowing money, some people must pay more for that privilege than others do.

    While this might seem unfair, there are time-tested reasons why this is the case. Some people must pay more for borrowing money than others because they are less likely to pay it back.

    This is what your credit rating tells potential borrowers. It takes your credit history the money you’ve borrowed in the past and how successfully you’ve paid it back on time and gives you a numerical score that informs lenders how risky it is to lend money to you.

    If you’ve demonstrated a record of borrowing money and paying it back on time, you will have a high credit score. A high credit score means you will pay less to borrow money because the lender’s risk is low.

    If you’ve been late on payments or failed to pay some loans back at all, you will have a low credit score. A low credit score means you will pay more to borrow money because the lender’s risk is higher.

    Knowing this is essential to understanding how auto financing works.

    Before you set out to buy a car, make sure your credit score accurately reflects your actual credit history. If there are errors on your credit report that reflect poorly on you for example, the report shows you still owe money that you, in reality, have paid back it will hurt your credit rating and, in turn, make it more expensive for you to get a car loan.

    More articles

    Popular Articles

    How To Get Loan Signing Jobs

    How To Get Cash Loan From Bank