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Get Pre-Approved Car Loans - Why and How?

Updated on July 18, 2017
Image by Nick Youngson, CC BY-SA 3.0
Image by Nick Youngson, CC BY-SA 3.0 | Source

Getting pre-approved car loans is the smartest thing that car buyers especially those with bad credit can do nowadays. Most people who are looking at financing their new car purchase would go directly to the car dealership and avail of their in-house financing. Though this is probably the more convenient and easier way to get car loan approval compared to that of a bank car loan, it is not the best option if one wants to save some cash off their car loan expense.

3 Reasons Why You Should Get Pre-Approved Car Loans

No Pressure. When going directly to the car dealership to shop for your new car, you would be dealing with salesmen who would most likely convince you to a car deal (highly priced car with high interest rates) where they make the most profits off you. If you are a first time car buyer or one who has bad credit, you may be tempted or pressured to accept whatever car loan deal the salesman may offer you.

But if you already have a pre-approved car loan on hand, you don't have to give in to that pressure. You can go to the car dealership as if you are buying with cash on hand. With a pre-approved car loan, you know your spending limit so if the dealer gives you an offer that is beyond this, you can politely refuse the offer and look for another car which is lower priced or another dealer giving a better deal.

Negotiating Power. Since you have a pre-approved car loan, you can negotiate without worrying that your loan will not be approved. You can bargain for the lowest car price or the lowest interest rate deal possible since you are actually going to the car dealership as an empowered cash buyer.

Wise choice. Before getting a pre-approved car loan, it is part of the car buyer's homework to get different car loan quotes and compare the rates from different car loan providers. By going through this process, you can make the smartest choice when it comes to applying for a pre-approved car loan deal. You get to pick out the best car loan terms that is affordable and appropriate to your needs. Unlike when at the dealership, you don't hastily accept whatever rates the dealers say saving you much more of your hard-earned money.

How to Get Pre-Approved Car Loans

As with the usual steps involved in getting a car loan, you, as a car buyer, need to consider the following steps before going to the car dealership.

1. Know your budget.
You should know how much you can afford to spend for this new car purchase. Consider your monthly income and your monthly expenses. After getting the difference, determine how much money you can allocate to the new car purchase without sacrificing your living allowance.

2. Select the car you are going to buy.
When selecting a car, think about your needs and wants when it comes to the type of car you would buy. Since you already know your budget, consider also the purchase price of the car, whether brand new or second hand. You may also want to check the manufacturer of the car brand you want to buy for any special offer like cash rebates, discounts or financing offers.

3. Research on car loan deals. There are many places where one can apply for a car loan aside from the car dealership which include the local banks, credit unions and online car loan companies. If you want to make a short cut in your research efforts, try online car finance brokers. They usually have access to the different rates that various lenders offer. Get quotes from the different lenders and compare the information they provide. You can also use free tools they have on their site like car loan calculators to help you estimate which car loan deal suits your budget and needs.

4. Check your credit report. Before applying for car loan pre-approval, it is best to check also your credit report. Lenders usually base the loan approval decision on the applicant's credit history. The credit report essentially shows if an applicant is capable of paying back the loan. Just make sure that there are no errors in your credit history. And if there is, you should take corrective actions.

5. Get the Pre-Approval. From your researched data of car loan quotes, choose the best car loan deal and apply for pre-approval from the particular finance provider. If applying for pre-approval on online car finance companies, usually the response time is short and quick. Once you get pre-approved, you can then head over to the car dealership and shop for the car you want.

Knowing that you can get a pre-approved car loan before going to the car dealership will surely help you get the best car loan deal there is - one that is affordable and within your budget and one that is most appropriate to meet your personal car needs.


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    • BHPH profile image

      BHPH 5 years ago from NC, USA

      Great hub! I always advise my friends to arrange their financing ahead of time. Otherwise, you can fall victim to "rate-padding" - a practice whereby your dealer's F&I (Finance & Insurance) officer charges you a few extra percentage points than his or her third-party lender requires, only to pocket the extra profit.

    • monicamelendez profile image

      monicamelendez 5 years ago from Salt Lake City

      I definitely think it's smart to get a preapproval. It makes it a lot easier when you're shopping around and it helps you to avoid borrowing money at the dealership, which is a much more expensive option.

    • Gagan Modi profile image

      Gagan Modi 6 years ago from Delhi, India

      Best Benefit of Pre approved loans is Hassle Free Documentation with Express Sanction. It gives you the power of negotiating with the dealer to get best deals.

      For More info on Car Loan with Calculators and Interest Rates in India:-