Most of us don’t have extra cash lying around to buy a new vehicle. Instead, it’s likely that you’re going to have to rely on an auto loan to finance the purchase of your new vehicle. Before you head to the car lot, it’s a good idea to consider getting pre-approved for a vehicle loan.
What is a Pre-Approved Auto Loan?
Many people get confused and use the terms pre-approval and pre-qualified as interchangeable. In reality, these are not the same term. Pre-qualified simply means that you met some basic standards that the lender has set. A pre-approval, on the other hand, means that the lender has authorized you to take out a loan up to a certain amount of money for a specific rate and time period.
When you have an auto loan pre-approval, it means that the lender actually reviewed your credit report, income information, and other aspects of the loan application process. They have decided to provide you with a firmly approved offer for the purchase of a vehicle. Traditional banks, local credit unions, or even through financial institutions online can get you a pre-approval for a loan.
Benefits of Pre-Approved Auto Loans
One of the biggest benefits of getting a pre-approved auto loan before you go car shopping is that you have an idea of what your budget is going to be. Since the loan amount only goes up to a certain number, you know that you can’t purchase a vehicle over that amount. This can be extremely helpful to ensure that you don’t try and purchase a car that is outside of your budget or that you won’t get approved for.
When you take the time to get pre-approved for an auto loan, it gives you bargaining power when you get to the dealership. Most dealerships will offer some sort of auto financing. You may find that the dealership will offer you a lower interest rate than you’re pre-approved interest rate to get your business. This provides the perfect bargaining chip to try and get the best rate possible for your auto loan.
Another great benefit to getting pre-approved for an auto loan is that it takes some of the stress out of the car-buying process. Instead of worrying about whether or not you’re going to get approved, you now know what you’re approved for. You can focus your efforts on examining the vehicles and their features instead of the price. This will help to ensure that you walk away with a vehicle that you love instead of one that you regret the next day.
You likely won’t have to worry about refinancing an updside down auto loan. According to Lantern by SoFi, “To say you are upside down on a car loan means that your car is worth less than the remaining amount you owe on loan”. This can happen for several different reasons, one common one being that you had a higher than necessary interest rate on your loan. This happens when you visit a dealership without having a pre-approval.
As you’ve discovered, getting pre-approved for an auto loan is a great way to start out the car buying process. Not only does it help to put your mind at ease about the financial aspect of purchasing a car, but it also provides you with a bargaining chip that you can use to get an auto loan at the best possible rate.
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Related Categories: Cars & Vehicles, Money, Reviews
