What Are The Benefits of Auto Loan Pre-Approval?

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, - May 27, 2016

When you need a loan to purchase a new or used car, auto loan pre-approval is one of the better options you have. The loan approval process can be lengthy and disappointing, especially if you have a less than stellar credit rating. Getting pre-approved for an auto loan means you can shop with confidence, as the loan will already be in effect.

This type of car loan approval provides car shoppers with a good solid estimate of what they can expect for getting a car loan on a particular vehicle that they find at the dealer's lot. Here are some of the main benefits of auto loan pre-approval.

Pre-Approval Car Loans

Tests drive some models, pick out the one you like and then apply for the loan. It is in your best interest to apply for the loan before you begin shopping. That way you won’t get your heart set on a car, only to discover your credit isn’t good enough to secure the proper loan. With auto loan pre-approval, you will know beforehand what you can afford.

Secondly, if you are pre-approved for an auto loan, chances are you won’t apply for it through the dealership. Car dealers always tack on a percentage point or more to your interest rate that is pure profit for them and/or the loan broker.

Confidence at the Dealer's Lot

Customers who don't like financing through local dealerships typically opt for pre-approval from outside lenders. When the customer looks at a sticker price on a vehicle, they know whether they are already qualified to buy it or whether they will have to dig a little deeper. Anyone who has struggled with arranging financing through dealer representatives will be likely to look to this option in the future.

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Getting a Price Range

Lots of people would say there's no better way to get a price range than to seek auto loan pre-approval. What the lender comes back to you with will be your guideline for purchase price. This can even help counteract the pressure from dealer. Simply show your pre-approval amount and stick to it or start lower and build up to your maximum purchase amount.

Avoid Sales Games

Often times there are lengthy delays in the sales process, where a sales rep “visits the sales manager” to arrange for a better deal. Illusory practices like these are often just a front for squeezing the most interest out of a customer and this is where auto loan pre-approval comes in handy. A customer who enters the lot with pre-approval already knows where they stand—they can't be swayed by detracting questions about their credit or unnecessary delays.

Your Credit Score

Another great aspect of arranging for car loan pre-approval is that you’ll need a copy of your credit report prior to looking at cars and trucks. This gives drivers a chance to fix their credit before they start shopping for vehicles, if needed.

These are just some of the advantages of getting auto loan pre-approval. Customers can often get auto loan quotes easily over the Internet or by phone to use when visiting their local dealer’s lot.

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The CarsDirect editorial team is dedicated to providing our readers with the latest on new and used cars, expert opinions on which vehicles make the grade, and all the fun stuff in between.

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