4 Smart Reasons to Get Pre-approved for a Car Loan
If you are in the market to purchase a new vehicle, before you start shopping, get pre-approved for a car loan. Getting pre-approved for a car loan is a smart move to make before you start the car buying process.
#1: Lets You Know What You Can Borrow
When you get pre-approved for a loan, the pre-approval process will let you know how much you are approved to borrow. It is hard to go shopping for a car if you don't know how much you will be approved to borrow.
The pre-approval process will let you know if the lender will let you borrow a certain amount of money. Knowing how much you are pre-approved for through one or more lenders will give you a price range that you can focus on as you shop for a new car. You will know if you can only afford a basic car through financing or if you will be able to afford a more fancy vehicle through financing.
What you can borrow will be based on your income, housing expenses, and credit score.
#2: Allows You to See Financing Rates & Monthly Payments
Second, when you get pre-approved for financing, you will also be provided with information about what your potential monthly payments will be if you take out your fully pre-approved financing amount. For many people, the monthly payments are more important than the overall amount they are borrowing. You need to make sure you can afford to pay the monthly payments that you are going to have to make.
You will also be able to see the financing rate that a particular lender is offering you, which will allow you to shop around or even use that information to bargain for a lower interest rate with the dealership.
#3: Provides a Backup Plan
When you get pre-approved for an auto loan, you have a back-up plan if you don't like the financing that the dealership offers. When you have a pre-approved offer in hand, you have a back-up plan if you don't like the financing offers that other lenders or dealership provides you with. It can be powerful and provide great peace of mind to know you have a back-up plan in place.
#4: Gives You Freedom to Check Out Multiple Dealerships
Finally, when you are pre-approved by one or more lenders, you have the freedom to check out multiple dealerships in order to find the vehicle that works with you. When you depend on dealer financing, you can generally only use that financing offer at that dealership. When you get pre-approved from a couple of different lenders, you can work with a wider range of dealerships.
If you want to buy a new vehicle, you should get pre-approved before you start the shopping process. You don't have to use your pre-approved offer; however, that offer can provide you with information about how much lenders are willing to lend you. Contact local dealerships to buy a new vehicle.