Getting pre approved auto loans can give you bargaining leverage as you walk into a car showroom to purchase a car. While many people are hesitant to approach a car loan before they have secured an auto for purchase, doing so can help you when looking at buying a car.
Advantages of Car Loan Pre-Approval
Lots of financial experts recommend pre approved car loans for drivers looking for a new or used vehicle. There are a lot of reasons to go with pre-approved auto loans, and drivers can really profit from taking a look at some of the benefits that a pre-approved auto loan can provide.
- Shop around. Going to third-party lenders before visiting the dealer's lot lets drivers shop around for the lowest interest rates, and the best custom auto loan situations for their specific budgets.
- More leverage at the lot. Another big plus for getting pre-approved car loans is that this process allows car shoppers to go to the dealer already knowing that they are approved to buy. This is big for drivers who don't like sitting at the lot waiting to know what they can afford. Knowing up front about your financing options can help you make the right decisions when you are actually shopping for that next vehicle.
- Breaking up complexity. Another thing that lots of drivers like about auto loan pre-approval is that it lets them focus on one thing at a time; while talking to the third-party lender, the customer resolves all of the questions and issues around financing. When visiting the dealer, they are free to spend their time focusing on all of the questions and issues regarding a specific vehicle that they would like to buy.
- Take advantage of rebates. Another big plus about auto loan pre-approval relates to the way dealers often handle financing. In lots of cases, a dealer will have customers choose between 0% financing or other attractive financing options and a manufacturer's rebate on a vehicle. In most cases, experts recommend to shop or go with the rebate. With financing already secured, a car shopper is more likely to go with the rebate option.
- Planning a purchase. Auto financing pre-approval helps out car shoppers who may otherwise feel pressured to come up with a large down payment when they make selections at the lot that the dealer's representative says they cannot finance. Car shoppers often feel that getting pre-approved takes some of the pressure off of negotiating a deal. It leaves them less vulnerable to what a dealer's representative may say about their credit, and with some rumors circulating about deceptive practices at some dealers lots, knowing where you stand can be a significant asset to a car shopper.
These are just some of the reasons to go with the third-party lender for a "pre-approval" financing process that fits your budget and helps you maintain good personal finance when getting into that next new or used vehicle. Take these into consideration when scanning the lots for used car purchase, or taking advantage of government incentives for new car buying.
How to Get Pre-Approved for a Car Loan
If you are planning to purchase a car, it would be a good idea to get pre approved car loan. The process for an auto loan pre-approval is basically outlined below.
- You will need to have proof of your income to show you are capable of repaying the loan. Income from employment and other sources is important. Any savings or assets will also be considered. Lenders are interested in collateral that can be recovered in case you default on the loan. For car loans, the car itself often serves as the collateral and if you fail to repay the loan, lenders will often repossess the vehicle.
- If you are being pre-approved for an auto loan by a bank or credit union, they will often require that you bring in your latest pay stubs from employment and proof of other income, bank account savings and checking statements, credit card and other debts, and copies of your most recent tax return. Gather these documents (for both you and your spouse, if you are married) for pre-approval for a loan.
- Dealers often offer tempting interest rates, or 0% financing, but actually only a few buyers are eligible. They offer the convenience of providing financing through their own auto loan departments. This often results in paying the price of the car with an additional 7% to 15% according to your credit standing. It may be easier to qualify for a car loan at the dealership, but be aware of all the details and read all fine print extremely carefully. Consider how much the car will end up costing over the live of the loan. The cost, including interest rates, fees, etc. may be a surprising shock to you.
- Shop around and compare rates at banks, credit unions and auto dealers. Compare the amount for final costs of the loan. Inquire about any consequences for early pay-off or for transferring the loan. Some loans require that early payments go mostly toward the interest with little being applied to the principal. This can be costly in certain circumstances.
- It might be a good idea to get a copy of your credit report and credit score before applying for a car loan. You can personally obtain a free credit report that will not count as an inquiry. However, if several banks or auto dealers make inquiries, it could lower your credit score. Usually, you must pay for a copy of your credit score. A good credit report will show that you are capable of paying your bills on time and that you limit your debts.
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Getting pre-approval for an auto loan will give you the opportunity of flexibility and savings before you consider a purchase. It will also provide the advantage of knowing how much you can qualify for in a loan before you begin shopping. In addition, it may help avoid paying a large down payment for your car.
Lenders may want to know vehicle information up front; they like to have the year, make and model as well as other information about the vehicle in order to approve a loan.
One of the important factors in being able to secure a car loan--whether through a car dealership or from a secondary source like a bank or credit union--is your credit report. Every person in the United States is legally entitled to at least 1 free credit report every year from all of the credit reporting agencies, and if you have been turned down for credit you are also entitled to a free credit report.
Once you have a copy of your report, review it not only for accuracy but also to determine your current credit rating. In many cases, credit reports have errors that can drive down a credit rating. If you discover this to be true on your report, take steps to remove the errors and improve your credit score. Also, if you have positive credit accounts that are not listed on your report, report this information to the credit reporting agency.
Most of the time a perfect credit report is not required for car loan pre-approval. However, on average, car loan lenders are looking for a credit score of at least 680 or higher.
How to Get Pre Approved for a Car Loan with the Best Rate Possible
When it comes to getting car loans, it seems that the deck is stacked against you. A pre approved car loan can be somewhat of a hassle, but the smart consumer will know just how to work his or her way around the system. Many buyers make the mistake of trying to purchase a new car without first checking into online auto loan rates. You can save yourself some misery by knowing exactly what current loan rates are and who are the best individuals to deal with. You can achieve more from knowing these things in order to get a pre approved car loan.
The key to any successful mission is knowing what key elements will work for you. Having a good credit history will enable you to pay lower auto interest rates, unlike someone with a bad credit history paying higher rates. Watch out for scams such as dealers who tell you that it is required to monitor cash. Guaranteed car loan pricing does not come from having to "monitor cash." This was noted as one of the "Top 10 Car Dealer Scams," and if you fall for it, they will certainly use it. Remember these easy steps and guard yourself well to get a pre approved car loan for the best rate possible.