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What is the meaning of preapproval for a car loan?

I don’t know how much I can expect to spend on a car loan. My friend told me to get a preapproval, but I don’t know what that means. What's a car loan preapproval?

avatar
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Preapproval for a
car loan
 is when a lender looks over your credit report, debt-to-income ratio, and income to determine how much they’re willing to offer you for a loan and what interest rate they may charge. Getting preapproval can help you budget for a new car and figure out what your monthly payments might look like.
Keep in mind, a preapproval will run a hard check on your credit score, which will decrease it by five to ten points temporarily.
If you’re looking for more ways to save money, make sure to shop around for car insurance. The lender will require you to have full coverage, which can get rather expensive if you don’t compare prices. Use the
Jerry
 app to look at quotes from over 50 top insurance providers.
MORE:
New car insurance: What coverage do you need when buying a new car?
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