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What is preapproval for a car loan?

I’m shopping for a car and I need financing. My friend told me that I should get pre-approval so I can budget accordingly. The only problem is that I have no idea what that means. What is preapproval for a car loan?

avatar
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Congratulations on moving forward with your new car purchase! Like about 80% of car buyers, you need financing, so don’t sweat it.
Preapproval for a
car loan
is a non-binding agreement or conditional loan amount given to you by a lender that outlines the amount they’re willing to lend you, as well as the possible interest rate and monthly payment amount.
The reasons you should strongly consider preapproval for a car loan include:
  • Focusing on the car rather than the loan
  • Knowing your budget
  • Using the pre-approval amount in negotiations
To gain pre-approval, shop around for lenders with the most attractive car loan rates. Then,
  • Check your credit to ensure you don’t have any delinquencies or derogatory marks.
  • Gather information, such as the vehicle you might want, pay stubs, and other personal information.
  • Apply to as many places as you’d like. You will only get one hard inquiry on your credit report if you apply to each lender within a 14-day period.
Now that you have a budget for your car loan and a possible payment, start shopping for
car insurance
with the Jerry app.
As a licensed broker,
Jerry
can help you find and compare quotes from over 50 top providers, including Nationwide, Allstate, and Travelers, in minutes. When you find the best rate for your new car, Jerry can help you buy your new coverage! Jerry customers save an average of almost $900 per year!
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