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?

Answer
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.
Eric Schad
Answered on Nov 11, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
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