What does pre-approved for car finance mean?
Car finance pre-approval offers a provisional decision based on the information you’ve provided during the application process. The information we require includes things like, but is not limited to:
Personal details
Information about your employment
Address details for the last three years
The information you provide is then used to perform what’s called a soft credit check, which is an initial assessment of your affordability that doesn’t impact your credit score. This is helpful if you’re looking for poor credit car finance.
Once you’ve received a pre-approval for car finance, lenders will need to know what car you ‘d like to buy, then see your ID and supporting documents. They’ll then conduct a deeper dive into your credit profile to confirm your eligibility– this is called a hard credit search.
If a lender is happy that the car meets their criteria, and you pass all their ID and document checks, which help protect you and the lender from fraud, you will be ready to drive away in your new vehicle.
How does car finance pre-approval work?
Car finance pre-approval works much the same as any type of personal loan approval. Firstly, you as the borrower will approach your selected lender and apply for the type of car finance you are looking for. The lender will then undertake the usual credit checks, confirm your identity and request any other documentation required to process your application.
The crucial difference is that you are not given the money immediately, but rather given conditional approval, or pre-approval for a period of time, whether that be weeks or up to a month.
Before considering applying for a car loan pre-approval, it is a good idea to calculate your approximate repayments, so you have an idea of how much you can afford to pay. You can do this easily with our car loan calculator.
At Dyna money, once you have completed an online car loan pre-approval application, we will then arrange a call with one of our experienced lenders. They will ask you some additional questions and carry out a credit check. Once we have made an assessment, generally all going well, you will be provided with car finance pre-approval
How to increase your chances of receiving car finance pre-approval.
Know your credit history
Many borrowers opt to find out their creditworthiness before applying for car finance. Numerous online providers can easily provide you with your credit rating. If you have a low Credit Score you can look to fix any errors before applying for pre-approval.
Have your documentation ready
Collect recent pays lips, bills, residential and employment histories and any financial statements in preparation. Providing these to your lender will not only speed up the car finance pre-approval process but may also assist in obtaining a more competitive interest rate.
Contact a non-bank lender
Non-bank lenders often offer more competitive rates than traditional banks and can also be a good avenue for borrowers who may have a lower credit score or bad credit history.
How Does A Credit Check Fit Into Car Finance?
A credit check is a key part of the car finance process. It helps us see how you deal with money. This includes how reliable you are to lend to, and how likely you are to make repayments on a loan. Your credit score is a really important part of your application for finance, but it isn’t the only one:
We also look at:
Your Age
Your Income
Electoral Roll Information
Current Financial Commitments And Debts
Loan Amount And Repayment Period
All these factors come together to make a decision. We look at as much as possible to make sure you are assessed properly for your loan
Finalize your auto loan
Confirm the terms with your lender once you’ve found the right auto loan. You must send in any required paperwork, including proof of insurance, before signing.
Sign the loan contract: If you agree to the terms, review and sign the loan contract. If you have a co-borrower or co-signer, they will also need to sign the contract. If you have an auto loan from a dealership, the dealer will provide the lender’s contact information on the contract.
Get the vehicle title and registration: You must have your vehicle title sent to the lender and the vehicle’s registration updated to your name. The dealership will usually take care of this. If not– or if you’re buying from a private seller– work with the seller and DMV to update the necessary documents.
Take possession of the vehicle: After you finalize your auto loan and complete the sale, you can take possession of the vehicle. While your lender will be the lienholder, you will be the official owner in charge of maintenance costs and general upkeep.
It’s an easy out when dealer finance is brought up
Some people can find it a little uncomfortable when, while talking to a salesperson in the showroom, dealer finance is brought up. And they will most certainly try their absolute best to get you on board with it, not only because it helps them fudge numbers during the negotiation but also due to the fact that a substantial amount of their commission comes from the money made selling their financing.
But when you have pre-approval, not if but when dealer finance is brought up, you can simply let them know you’ve been pre-approved and aren’t interested.
Avoid expensive car finance
Other car loan products like dealership or seller financing are usually more expensive and have higher interest rates. Those who don’t get pre-approved may not be aware how much costlier these other loan products are. When you have a pre-approved loan, you can stick to your choice of financing letting you save more money on repayments.
You’re not guaranteed financing
A preapproval on an auto loan is conditional– there are no guarantees that the lender will fund the loan. Expect to provide additional information and supporting documents before receiving final approval. If there are discrepancies in the application and documentation, or if your credit rating drops significantly, you could be denied financing.
Select The Best Financing
When you get pre-approved for a car loan, you don’t have to get your financing through the dealership. They are known for offering the highest interest rates compared to other available options. Instead, you can take your time to review your options and select the best financing based on your credit and income.