What should I know about car loan preapproval?
I've read that getting preapproved for a car loan is a smart move, but I'm not sure how it works. What should I know about the process?
Car loan preapproval is a great way to set your budget and find out how much car you can afford ahead of time. It’s a smart play for most car buyers, especially first-timers.
Here’s how to get preapproval. First, shop around to find the best loan rates between dealerships, banks, credit unions, and online lenders. Then, apply for preapproval and show all of the required documents, which may include:
- Driver’s license
- Proof of income
- Proof of residency
- Vehicle information, or a basic idea of what car you want
Most preapprovals are accepted or denied within 24 hours, so you won’t have to wait long after applying. (This is different from applying for full approval right off the bat.) If you’re approved, you’ll get a letter stating how much money you’re approved for as well as potential interest rates based on your credit score and the term (length of loan) you choose.
With the preapproval letter in hand, you can find a car that fits your budget and even use it as a negotiation tool with the dealer. Once you have the car you want, simply return to the lender to finalize the loan.
One of the first things you’re going to need to do once you sign onto your loan is to find a full-coverage insurance policy for the car. Use Jerry’s free quote comparison app to review dozens of competitive quotes and find the most affordable policy.
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