When searching for the right loan that will finance the purchase of your car, carefully considering all your circumstances and options together with acting fast when you need to is important. Having a pre approval for a car loan could make things happen fast for you as it will help you lock down that car you have been eyeing for a while before someone else does plus it will save you lots of money. So with that being said, let’s take a look at what pre approved car loans are.
What is a pre approved car loan?
A pre-approved car loan is where your lender agrees in principle to lend you a certain amount of money to purchase a car subject to credit approval and an invoice from the dealership. It is an indication from a lender that you are eligible to apply for a car loan of a specified amount having assessed your credit rating, liabilities and assets.
Entering a car dealership with a car loan pre approval can help with speeding up the car buying process. This is because it allows you to know your maximum available funds so you can narrow your search, negotiate with more confidence and certainty plus also you can bid confidently in the case where you are going to auction. For example, if you are pre-approved for a $30,000 loan, you will have to go for cars that are within that budget.
When one applies for a pre approval loan, your financial circumstances will be evaluated and the lender will determine how much you can borrow. Just like a normal loan, you will be required to provide details such as your bank statement, proof of income, pay slips etc. Note that pre-approvals are only valid for a short period of time. Pre approval isn’t a guarantee of the loan itself so you will still have to contact the lender again for settlement.
When you have a pre-approved car loan, car dealers won’t try to convince you to buy a car that is above your budget as they are quite good at squeezing money out from you. This also means if the salesperson can’t meet your negotiations you will have to find another alternative. Pre-approved car loans serve the same purpose as the normal kind of car loans therefore, you can purchase a car bought through a dealership, private sales or at an auction. While pre-approved car loans are not as widely available as the other standard car loans, there are still a number of lenders you can consider such as Pre-Approved Autos.
Some of the things you need to consider before applying for pre-approval are;
- Your financial standing. Ensure you have the required funds or the pre-approval
- Thoroughly research the make, model and how much fuel the car you want consumes.
- Shop around so as to find the perfect dealer with the perfect deal for you.
- Test drive the car you would like to purchase.
What are the pros and cons of this loan?
Before settling on a finance option, knowing what the pros and cons are can help you decide whether or not it’s the best option for you.
- This loan helps you set a realistic budget which makes things easier for you while shopping for a car.
- It helps you strengthen your negotiating power as you are in a stronger position to do so.
- Pre-approval can also make you a more attractive buyer to a potential seller as it indicates you are more serious about purchasing the car.
- You can avoid upselling as you can use your pre-approval as an easy way to deflect add ons and extended warranty offers
- The buying process is much faster
- It is only available for a limited amount of time
- Getting a pre-approval from many lenders can affect your credit score so to avoid this, only get pre-approval from a preferred lender
- There aren’t a wide variety of lenders who offer pre-approval loans
- Pre-approval isn’t for everybody as it all depends on your credit score and history. Therefore, some lenders may not see you as a fit candidate for the loan.
- The amount of money that you are approved of may not be enough to purchase the car you had in mind, which can be demoralizing.
- This loan isn’t available for all cars as some cars over a certain age won’t qualify.
How to get pre approved for a car
To get pre-approved for a car loan, there are a few things you need to do. This include;
- Getting a copy of your credit score
- Ensure you have all the required documents including your payslips
- Compare a range of loans that you can apply for
- Contact the bank or financial provider you would like to apply with
Apply for a pre-approved loan with Pre-Approved Autos. The process is easy and fast and no deposit is required.