What Is A Hard Credit Inquiry
Every time you send a formal application for a loan, your lender sends a request to one or more credit bureaus to check your credit score. This is called a hard credit inquiry.
How do hard credit inquiries affect your credit?
Unfortunately, hard credit inquiries can hurt your credit score. Thats because a hard credit pull indicates that youre about to open a new credit account. Submitting multiple consecutive hard pulls reveals that youre applying for multiple loans. This might mean that youre desperate for credit, or that youre unable to pay your debts.
Of course, if youre approved for a loan, your responsible payment behavior will help your credit far more than a hard pull will hurt it. But if your application is denied or, worse, multiple applications are denied your dropping credit score might make it harder to secure approval.
Its a vicious cycle. The more you send loan applications, the more your credit drops, and the harder it becomes to get approved. And that damage will stay on your credit report for two years.
Note that there is an exception if youre shopping around for a specific type of loan. If your inquiries are all for the same type of loan and are made within a short time span , you wont be penalized. These inquiries will all count as one.
What Does It Mean To Get Preapproved For A Car Loan
When you apply for a car loan, a lender will check your credit score and several other factors to see whether you qualify. For many people, this happens after theyve decided which car they want to buy. This can lead to people being denied financing after spending hours filling out paperwork and negotiating at the dealership.
Getting preapproved for a car loan may make the approval process easier before you attempt to buy the vehicle. Instead of waiting until the point of purchase, you provide a lender with some basic financial information up front and the lender sends you a letter stating the loan amount youre approved for, as well as the annual percentage rate .
Preapproval is not the same as actually getting a loan. It usually requires less information and, depending on the lender, may result in a hard pull on your credit, which can affect your credit score. However, to get your loan once youve decided on a car, youll need to apply.
Strengthen Your Negotiating Position
With your lender-approved blank check or certificate in hand, youre transformed into a cash buyer, at the car lot, and youre in a much stronger negotiating position.
Without preapproval, heres how the car price negotiation game is played:
The smiling car salesman asks, So, what monthly payment are you looking for?
But if you get preapproved financing, you can avoid this sales tactic.
You can smile right back and say, Im a cash buyer. Lets just talk about the price of the car.
If you’ve got a trade, shopping around for online offers to properly value your old car will put you in a stronger position there, too.
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How Do I Get Pre
All the auto lenders featured in this review offer an instant pre-approval decision when you complete a short loan request form or answer a few online questions. An auto loan pre-approval is a necessary step toward getting you the loan you want, although it doesnt guarantee final approval.
Note that you can also fill out a loan application for a pre-approved loan at a financial institution like your online banking branch or local credit union. You will have to join the credit union before starting the car buying process.
Before receiving your loan, youll have to fill out a more extensive credit application and likely submit to a hard inquiry of your credit. A hard credit pull can temporarily cause your credit score to drop by five to 10 points, but the effect wears off within one year.
Conditional Approval Vs Pre
Conditional approval is given when the lender agrees to give you a certain amount to buy a car, assuming that the information on your application regarding the cars value is true. The lender still has to verify the cars worth with the dealership, and once the loan officer or underwriter is satisfied that all the information on your application is correct, the terms of the loan can be unconditionally approved. This means that your application will be moved forward to the stage where your funds are settled and your car purchase is finalized with the dealership.
In contrast, pre-approval holds less weight than conditional approval, because pre-approval only indicates the amount that you are theoretically eligible to receive for an auto loan, given your personal and financial information. It does not signal a binding commitment from the lender. You still have to apply for a loan, and the lender could decide to give you a different amount from the one you were pre-approved for or even nothing at all!
Pre-approval indicates to dealerships what lenders are likely to loan you for a car, but conditional approval is a much more powerful bargaining tool, because it indicates that a lender is actually going to give you a certain amount of money as long as a certain condition is met.
Pre-approval vs. pre-qualifying
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How Preapproval Works On Car Loans
With car loans, preapproval works by allowing you to lock in the rates and terms on a car loan before heading to the dealership. It draws out period between getting approved for a car loan and signing the loan documents.
Unlike preapproval on other types of loans, auto loan preapproval typically requires a full application, documents and a hard credit check.
What If Im Buying A Used Car Through A Dealer Or Private Seller
A pre-approval can work for almost every kind of car purchase, whether its a new or used car. Most dealers will work with credit unions, banks and other lenders, and will be happy to sell you a car through these funding sources. You can enjoy the benefits of getting your pre-approval before shopping for a used car at a dealer.
However, if youre purchasing your car through a private seller or smaller dealer, things will be a bit different. If and when youre approved, the lender will pay the seller the amount you owe and then youll repay the lender over the life of the loan.
Ready to hit the dealership? With your pre-approval letter in hand, you can feel confident knowing that you essentially have the money available to pay for the car, truck or SUV you have in mind. This way, youll be the one in charge of your purchase . By having your financing set up in advance, you can focus on whats really important getting the best deal on the ride you really want!
Apply for a pre-approval with Desert Financial.
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How Does A Pre
An auto buyer checking under the hood
If you’re in a hurry: Pre-approved auto loans let auto consumers know exactly how much financing they are eligible for to purchase a used or new car.
If you’re planning to finance a used car or a new car, getting pre-approved for auto loans or refinance car loans can mean the difference between a stroll through a park and an absolute nightmare. Granted, auto loan pre-approvals aren’t a necessary requirement for auto buyers, however, they can help approximate exactly how much you can afford.
It’s quite simple, really. Even if you just asked your lender for pre-approval, you will only be asked to supply some of your information and you’ll be confirmed about your financing status within 24-hours .
Note: Auto loan pre-approvals are typically only valid for up to 2 months, however, depending on your lender, your approval may be applicable for a different time frame.
Helps You Avoid Upsells And Add
A favorite trick of dealerships is to sell vehicles based on monthly payments.
For example, a salesperson might overestimate your payment once you choose a vehicle so that youll agree to add-ons when you go to sign the paperwork. If they expect your payment to be around $300, they may tell you that their prediction is $350. Then at the paperwork signing, they can say, Great news, at a payment of only $360, you get an extended warranty and appearance package! Sign here. This way, it looks like youre only paying $10 a month for the extras, but youre really paying $60 a month, including interest.
If you have a preapproved auto loan, youll know what your payment should be, sans upsells.
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How To Get Pre
Pre-approval does not mean youre guaranteed the loan. If you wish to proceed with a car loan, the lender will ask for supporting documents, like pay stubs and government-issued ID, to verify the information youve given so far and to do a more in-depth review of your finances. This includes a hard credit check. If everything looks good and there are no surprises, the lender will give official approval.
Is Prequalification The Same As Preapproval
You may have heard some people use the terms prequalified and preapproved interchangeably. While they are similar, there are some key differences.
A prequalification is a general estimate from the lender of how much you can afford to borrow. Its usually based on less information than a preapproval. As a result, theres a chance you might not actually qualify for a loan amount equal to your prequalification amount.Preapproval is much more accurate and definitive. In most cases, you can count on your loan application being accepted for the amount in your preapproval, or close to it. Many car dealerships consider a buyer with an auto loan preapproval as essentially a cash buyer.
Since a prequalification might not affect your credit score like a preapproval can, getting prequalified might be a good first step if youre still in the early stages of looking for a car and a lender.
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What To Do If You Cant Get Preapproved
It can be tough to hear that you dont qualify for preapproval when youre in the market for a vehicle. Preapproval declines happen for a number of reasons, including a lack of consistent and/or sufficient income or some adverse activity in background, says Mark Lucke, chief sales officer, Sunrise Banks.
Fortunately, there are some things you can do to improve your chances of getting preapproved.
What Happens After I Get Pre
After you get pre-approved for a car loan, most lenders allow you to shop around for around 30 days to find the right car. Some might offer pre-approval for as long as 60 days. Either way, you have a window of time to work with while your pre-approval still stands. If you dont make a decision during that time frame you can apply for another car loan pre-approval. Ideally, your financial situation hasnt changed much since then so its a smooth process.
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Streamlining Auto Loan Pre
Want to streamline the process? SuperMoney offers a free auto loan engine that generates competing personalized pre-approvals in just a few minutes.
Just answer a few questions about your desired loan and your financial circumstances, and youll get offers from several leading lenders. And since these are soft pulls, the process wont hurt your credit score.
Nobody wants to hurt their credit when shopping for an auto loan. Auto loan pre-approval can help you avoid needless hard pulls which could otherwise hurt your credit score for years down the line. Once you find the perfect loan, you can make your hard inquiry count!
Protection Against Unnecessary Add
Many times, dealers will push for their own financing or focus on the monthly payments which can set buyers up with long loan terms and bad interest rates. By coming in with a preapproval you already know that you have a competitive interest rate and a firm number for what you can afford. This can make it much easier to say no to additional add-ons or warranties offered when it comes time to sign paperwork.
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Enjoy The Convenience And Flexibility
Searching for your next vehicle doesnt have to feel rushed and you dont need to be surprised by sticker shocked prices. Making your preapproval your first step in car shopping gives you the flexibility to shop around any licensed dealership to find the best deal, and you have an entire 45 days to use your check from the day you apply. And did I mention the convenience? With seven branch locations across the metro Richmond area, and applications online or by phone, you can apply for your preapproval anytime and anywhere. And if youre wondering when you will make time to pick up your preapproval, our unique check-in-hand program comes with the convenient option of having your check delivered to your door or desk.
How To Get Pre Approved For A Car Loan With Poor Credit Today
We do not charged any fees for helping borrowers in getting preapproved for an auto loan all our online services are totally free of any costs. Our knowledgeable and experienced car loan advisors could assist you to pre-qualify for a vehicle financing loan regardless of the status of your personal credit profile. Over the years, tens of thousands of applicants have benefitted with our assistance and secured pre-approval auto loans that worked best for their specific type of financial needs and requirements. Hence, with our expert guidance online, your probability of getting preapproved for a car loan is fairly high. Get Pre-Approved in Minutes!
Getting pre approval for car financing helps to stay in budget as well reduces hassel in car buying process. Learn, how to qualify »
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Gives You A Price Range
With a preapproved car loan, youll know your monthly payment, loan term and the price of the car you can afford, all before you walk onto the blacktop parking lot. You wont be nervous sitting at a table in the dealership, waiting to hear whether the bank thinks you can afford the car because youll know youre already approved.
A salesperson might try to guide you to the most expensive models and tell you not to worry they can give you a longer term and keep your payment low! But youll already know that a longer term on a larger loan amount means a whole lot more in interest.
Get Your Auto Loan Pre
Before stepping on to the car lot, get a prequalified or pre-approved loan first. This can give you leverage when it comes to negotiating. Dealerships will try to offer you financing but may not offer the best rate. You will also know how much car you can buy. The temptation to upgrade to the latest bells and whistles may be high, so having the pre-approval amount beforehand can help you stay within your budget.
Dealers tend to take people with a pre-approved loan more seriously since they know they are ready to purchase a car as opposed to someone who is just window shopping. Many financial institutions or lending platforms will approve your loan on the same day you apply.
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Prevents Wasting Money On Interest
Shopping around with different credit unions and banks is the best way to make sure you get a good deal. Interest rates between lenders may vary significantly and can be as much as 20%. A high interest rate will quickly add up over the life of your loan.
If you show up at the car dealership without auto loan pre-approval, you won’t have all the facts at hand when the dealer offers you an interest rate. They might bump the rate up without you ever knowing.
On the other hand, if you’re pre-approved with your interest rate in mind, you’ll know whether the dealership’s rates are competitive and whether you can trust them to sell you a great car.
Get Preapproved And Youll Automatically Get Our Best Rate
When you get preapproved, because the details of the loan arent finalized yet, your rate isnt set. Youll get our best auto loan rate on the day you sign. Because weve already reviewed the complete application for your preapproval, theres no need to worry about financing surprises or missing information while rushing through a loan at the dealership.
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Simple Rules For Saving Money
1. Get preapproved for a loan before you set foot in a dealer’s lot.
“The single best advice I can give to people is to get preapproved for a car loan from your bank, a credit union or an online lender,” says Philip Reed. He’s an automotive expert who writes a column for the personal finance site NerdWallet. He also worked undercover at an auto dealership to learn the secrets of the business when he worked for the car-buying site Edmunds.com. So Reed is going to pull back the curtain on the car-buying game.
For one thing, he says, getting a loan from a lender outside the car dealership prompts buyers to think about a crucial question: “How much car can I afford? You want to do that before a salesperson has you falling in love with the limited model with the sunroof and leather seats.”
Reed says getting preapproved also reveals any problems with your credit. So before you start car shopping, you might want to build up your credit score or get erroneous information off your credit report.
And shop around for the best interest rate. “People are being charged more for interest rates than they should be based upon their creditworthiness,” says John Van Alst, a lawyer with the National Consumer Law Center.
If you take that bad deal, you could pay thousands of dollars more in interest. Van Alst says the dealership and its finance company, “they’ll split that extra money.”
