What does preapproval for a car loan mean?

I’m going to get a new car and will need a loan. I’m trying to get more organized and learn all the important terms. What does preapproval mean? Is it worth getting?

Answer
It’s smart to be organized with your loan—and yes, it’s very much worth it to get preapproval.
Preapproval is when a lender reviews your credit report to determine how much money and what kind of interest rate you’re eligible for. This does require a hard credit pull, which will cause a temporary dip in your credit score.
There are many advantages to getting preapproved for a loan. You’ll have a better understanding of your loan budget upfront, so it’ll be easier to pick an appropriately-priced car.
You can also talk to your lender about becoming a cash buyer when you visit the dealership.
This gives you a stronger position to negotiate from and it can help protect you against markups and upsells.
While you’re planning out expenses for your new car, don’t forget about finding savings on car insurance. Jerry is the easiest and most efficient way to find an affordable policy customized for you. The best part? The average Jerry user saves $879 a year on car insurance.
Lauren Smith
Answered on Nov 10, 2021
Lauren has written for World Nomads, the Matador Network, Korvia Consulting, and once upon a time Three Fates Games. She graduated from Columbia College of Chicago with a BFA in Creative Writing. After graduating, she moved overseas and lived in South Korea where she spent her free time traveling and going on road trips with friends. She misses the rest stop potatoes and is trying to figure out how to recreate them at home. She's now based outside of Chicago and when she's not writing she spends her free time reading, playing video games, and exploring whenever she can.
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