Benefits of an Auto Loan Pre-Approval

Shopping for a new ― or new to you ― car can be a mixture of exciting (shiny, awesome features!) and terrifying (so many choices!). Taking the time for a pre-approval can help with the anxiety and make the process a little easier.

First, what is a pre-approval, and is it the same thing as being pre-qualified? Although you might see the terms “pre-approved” and “pre-qualified” interchangeably, there’s actually a big difference.

• If you’re pre-approved, a lender pulls your credit in addition to reviewing your finances, so you have more specific information about your possible loan amount, interest rate, and loan term. These specifics can be affected by the vehicle you choose, but you’ll at least be in the ballpark.
• If you’re pre-qualified, a lender has taken a quick look at your finances, and based on the information at hand, believes you’ll be able to qualify for a loan of $X. This process doesn’t involve pulling your credit history and is more of a “guess-timate” than a pre-approval.

The pre-approval process is generally quick and doesn’t commit you to a loan from that lender. With a pre-approval, you:

Uncover Potential Credit Issues. When the lender pulls your credit history, you have the opportunity to review and resolve any issues, whether they are legitimate or mistakes. Ideally, you’ll start car shopping with your credit in good shape.

Know How Much You Can Borrow. Car prices are all over the place. A pre-approval gives you a price range to focus on, saving you time and helping you make sure you’ll be able to afford your monthly payments.

Increase Your Bargaining Power. A pre-approval shows the dealer that you’re a serious buyer and they may be more willing to help you find the perfect vehicle than if you’re “window shopping.” In addition, knowing how much you can finance allows you to negotiate on vehicle price, not the monthly payment amount, which generally ensures you get the best possible deal.

Eliminate Stress. Pre-approval gives you information about your potential interest rate, fees, and loan terms, meaning you don’t need to haggle over those details. You won’t need to worry about “hidden” fees or unnecessary charges.

Avoid Overpaying. When a car dealer knows how much you can borrow and at what rate, it gives them an incentive to beat or match the rate and terms – which can save you money.

Speed Up the Car-Buying Process. Not only do you not waste time looking at vehicles that are outside your budget, you’re able to skip several steps in the negotiation process.

If you’re planning on purchasing a vehicle, talk to your lender about a pre-approval. As you can see, it will make the overall process faster and much less stressful. If you have any questions about auto loan pre-approvals, give us a call today!

The views, information, or opinions expressed in this article are solely those of the author and do not necessarily represent the views of Citizens State Bank and its affiliates, and Citizens State Bank is not responsible for and does not verify the accuracy of any information contained in this article or items hyperlinked within. This is for informational purposes and is no way intended to provide legal advice.