What is a pre-approved auto loan?
Pre Approval auto loans are loan products that have already been conditionally approved by the potential lender. This means that the lender has already decided to give you the loan, assuming there are no drastic changes to your financial situation before the loan closes.
A pre approval offer will list your interest rate, auto loan amount and loan terms so you can walk into the dealership as a cash buyer with a firm understanding of how much you can spend. Pre Approval is helpful if you want to negotiate at the dealership. You will know exactly how much you can spend.
Pre Approval is helpful if you want to negotiate at the dealership. You will know exactly how much you can spend. And if you want to be sure you’re getting the best deal, see what the dealership offers in terms of financing. Either they can offer you a better rate or you go with the loan you already have.
Why should you get preapproved for a car loan?
Several advantages come with car loan pre approval, ranging from basic preparation to saving time at the dealership. Here are five of the most significant benefits of getting preapproved ahead of time.
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You’ll know what to expect
Pre Approval takes away the stress of the unexpected. Before you even step onto a car lot, you’ll know exactly how much you can borrow, what your loan payments will look like, and what the loan term will be.
This can help narrow down your choices to what’s within your budget and help get your finances in order for the coming months.
However, not everything is set in stone. “If the amount you need to borrow changes or the vehicle you want to buy changes, just reach out to the same person you have had communications with during the approval process,” Figueroa reminds us. “These are easy items to update, and a new decision will happen quickly.”
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You put yourself in a good negotiating position
A loan pre approval makes you a cash buyer when you arrive at the dealership. This gives you the upper hand and puts you in a great position to negotiate the best price with the dealership.
“Part of the deal is agreeing to price/terms, and the other part is getting financing arranged,” Figueroa explains. “If the latter has already taken place, then you have done much of the hard work already.”
Dealers also know that your pre approval will be accepted at any other dealership If you aren’t satisfied with the services or prices, they know that you can easily take your business elsewhere and still get the same rates.
“Knowing someone has already been approved on a loan increases the incentive to make a deal happen for car sales and management,” Figueroa says.
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You avoid markups at the dealership
Without being pre approval for a loan amount through a third-party lender, you may also be tempted to utilize the dealership’s financing program.
“Many times, the dealer has special rate financing like the 0% programs we have all seen advertised,” Figueroa explains.
Deals like that can be hard to pass up, but what dealerships often don’t disclose is markups and upsells that can leave you spending way more than initially intended.
“Do not believe it if a dealer tells you the only way to get the 0% or other low rates is to purchase additional products,” FIgueroa adds. Even if you do want add-ons like a gap policy or a warranty, these are often cheaper if you finance through a bank or credit union.
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You spend less time at the dealership.
No one likes to spend their Saturday afternoon standing around a car dealership. Being pre-approved allows you to skip the dealer financing portion of the negotiations, meaning you get to hit the road in your new ride sooner.
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You have the freedom to buy what you want
If you find a reasonable interest rate through a dealership, you are limited to the inventory they have on hand. If you don’t see the car you want there, you are not guaranteed a similar rate at the dealership next door. Loan pre-approval, however, comes from a third party institution, which means that you have the freedom to purchase the car from wherever you want.
What Are the Requirements for Pre Approval?
You’ll need to meet a few basic requirements before getting preapproved for a car loan. All car loan offers are “subject to credit approval,” so even if you see a great deal advertised, you still need to have good credit to take advantage. Some lenders also require a certain level of income, depending on the loan amount.
On your loan application, you will likely need to include the following income information:
Gross monthly salary or income
Other sources of income including:
Disability
Retirement
Child support
Alimony
Lenders ask about your income because it indicates how likely you are to pay back the loan. If you have a low income but are asking to borrow a large amount of money, the lender might offer a higher interest rate to offset the potential risk. Ultimately, lenders want to avoid borrowers becoming delinquent on a loan.
Apply for an X-press Car Loan
Now you need not postpone your dream of becoming a car owner. If you are pre-approved, you are all set to purchase your dream vehicle. However, if you are still somewhere on the path towards pre-approval you can reduce a long-drawn application process to just half an hour and pay the dealership within 48-72 hours with your own Xpress Car Loan.
* Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Xpress Car Loan at the sole discretion of HDFC Bank limited. Loan disbursal is subject to documentation and verification as per Banks requirement.
Does pre-approval guarantee a car loan?
Pre-approval is a conditional approval based upon the information received at the time of issuance. It is not a guarantee but is an important part in the car loan process.
Unconditional approval will be provided once all documentation has been received and a final credit assessment has been conducted.
How to buy a car with a preapproved loan
Once your lender pre approval your loan, it’s time to hit the dealership. When your application is approved, your lender will give you an auto loan pre approval letter explaining the financing amount you qualify for and the terms.
Bring your car loan pre approval letter when you shop for a new car. You can let the salesperson know you’re pre approved for financing, which may help you get a better deal on a car.
When you’re shopping, stick to vehicles you can afford based on your pre approved loan terms and be mindful of any down payment you may need to make as part of your purchase.
Once you pick out a car, call your lender with the details. They can help you lock in your financing based on your pre approval terms so that you can live in your new car. You’ll also want your auto insurance secured before you drive away. Learn how insurance works when buying a new car.
Can I get approved for an auto loan before I select my car?
Yes, you can pre-qualify online and get pre-approved at a branch or over the phone to find out the amount you can borrow to start shopping.
You can present your pre approval to the dealership or inform them of your desire to borrow with WECU. Dealerships can also access the preapproval loan details through the Credit Union Direct Lending (CUDL) system.
What if I’m buying a used car through a dealer or private seller?
A pre-approval can work for almost every kind of car purchase, whether it’s a new or used car. Most dealers will work with credit unions, banks and other lenders, and will be happy to sell you a car through these funding sources. You can enjoy the benefits of getting your pre-approval before shopping for a used car at a dealer.
However, if you’re purchasing your car through a private seller or smaller dealer, things will be a bit different. If and when you’re approved, the lender will pay the seller the amount you owe and then you’ll repay the lender over the life of the loan.
Ready to hit the dealership? With your pre-approval letter in hand, you can feel confident knowing that you essentially have the money available to pay for the car, truck or SUV you have in mind.
This way, you’ll be the one in charge of your purchase (not the salesperson). By having your financing set up in advance, you can focus on what’s really important– getting the best deal on the ride you really want!