How to Get Preapproved for a Car Loan
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Many people opt to get preapproved for a car loan when beginning the process of shopping for a car. A pre-approval is essentially when a lender looks at your financial situation and the car you’re planning on buying, and lets you know what type of deal they’re comfortable giving you.
You get preapproved for the loan, but you’re not yet signing the loan. It’s a common approach for car buyers, and it makes the process a lot easier.
Here's Jerry's guide for everything you need to know about getting preapproval for a car loan.
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Benefits of getting preapproved for a car loan
One of the benefits of a pre-approval is that it allows you to set a firm budget since you know exactly what you’ll be paying and what the terms of the loan are.
This not only allows you to develop a budget, but it also keeps you from getting talked into a financially irresponsible loan while caught up in the moment at the car dealership.
When you get preapproved, you also strengthen your ability to negotiate with a car salesperson. You’ll already have the terms of the loan figured out, which means you can be strong when going back and forth over the price of the car.
With a preapproved loan, a car salesperson will only be selling you on the car price, not on the loan price, and this makes it easier to get a good deal.
Determine which lenders you want to get a preapproval from
The first step is to figure out which lenders you want to work with. It’s a good idea to do your research and find some lenders that you feel comfortable about.
It’s also a good idea to include your bank or credit union in the group. A bank or credit union that you already use will be familiar to you, which not only means that you already have communication with them, but also that you’re more likely to get a good rate.
Choose two to four lenders that you like, and you’re ready to move forward. When you do have two to four lenders picked out, it’s time to contact them.
You can do this by going to the lender in person, calling them on the phone, or visiting their website, which should have a preapproval application option. Let the lender know that you’d like to apply for pre-approval. They’ll let you know what the next steps are.
Fill out any necessary paperwork required
Now that you’ve begun the preapproval process, follow the lender's instructions for filling out preapproval forms. These might be standard paper forms that you need to manually fill out, or, more often than not, they’ll be an online application. Some lenders might even let you apply for preapproval over the phone.
Many people are hesitant to get preapproved from multiple lenders because the lenders perform a hard inquiry on your credit score, which can have a small, temporary hit to your credit. However, if multiple lenders perform hard inquiries around the same time, it will only count once.
Wait and review your preapproval options
Now that you’ve applied for your preapproved loans, sit back and wait for the offers from the lenders to come in. Once the offers have rolled in, you can decide which one is best for you, and begin the process of purchasing your car and getting your loan.
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