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How to get preapproved for an auto loan and gain negotiation power Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by offering interactive tools and financial calculators as well as publishing original and impartial content. This allows users to conduct research and compare information for free to help you make informed financial decisions. Bankrate has agreements with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this site are from companies that compensate us. This compensation could affect how and where products appear on this site, including for instance, the sequence in which they appear within the listing categories and other categories, unless prohibited by law for our mortgage home equity, mortgage and other products for home loans. However, this compensation will have no impact on the content we publish or the reviews that appear on this website. We do not cover the vast array of companies or financial deals that may be available to you.
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4 min read . Published March 07, 2023
Written by Rebecca Betterton Written by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers with the ways and pitfalls of using loans to buy an automobile.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate from late 2021. They are committed to helping readers gain confidence to control their finances through providing precise, well-studied information that breaks down otherwise complex topics into digestible chunks.
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In the case of negotiations , you want to do all you can to keep the negotiations under control. Making an application for car loan preapproval is one method to gain an advantage in the purchase of a vehicle. This means an aspiring lender has reviewed your credit history, application as well as the required documentation and is willing to give you an official loan offer of a specific amount. This is true, even though the terms are often used in conjunction. When you’re prequalified for a loan it is because the lender will only conduct a soft credit check, and approval isn’t guaranteed until you submit the complete application. Being preapproved for a car loan just takes a few minutes more time and will ensure that you have a firm estimate of the amount you can spend once you’ve gone car shopping and the you’ll likely receive. Step 1. Organize the necessary documents You are able to get preapproved for an auto loan through banks, online lenders, or credit unions. Whatever option you decide to go with first, you must begin collecting the necessary information for an application. This includes: Personal information like your name, Social Security number, driver’s license, information about your contact and your address. Your income, including your employer, its contact information , and your annual earnings. The documentation for income you could be asked to provide can include a W-2, tax return and pay stubs. The amount you’d like to finance and your preferred auto loan term. Information on the age as well as the mileage on your vehicle in the event that you are purchasing a used. Details about the trade-in when applicable. Tips from the Bankrate
To make the process easier, gather necessary financial documents ahead of time and save them as PDF files on your PC.
Step 2. Shop around for loan options Just like you shop around for your automobile, it’s also recommended to research loan options . The interest rates you pay for are affected by your credit history plus other factors that can differ from lender to lender. By shopping at different lenders, you might be able to get better rates, and also get better loan terms. Achieving an interest rate less than a tenth percentage point lower could have a huge impact on the amount you’ll pay over the life of the loan. For the best rate complete applications with several lenders. Bankrate’s tip
Find Bankrate’s top choices for the to start your search.
3. Send the preapproval form In the majority of cases, the application process is similar to the typical full loan application. It is possible to apply online, over the phone , or in person. If you decide to apply online, you should research the most trusted lenders. No matter how you complete your application — online or in person you’ll need to invest about 15 minutes completing each application. Certain lenders have an complex preapproval process and others may require a minimum credit score or details about the vehicle’s age and mileage. Look for details about application requirements on lender websites prior to submitting an application. Once you’ve provided the required information, most applications are generally processed in about 30 minutes. Bankrate tip
Once your loan has been approved generally, you have 30 to 60 days to look for a car before the loan offer expires.
Benefits of auto loan preapproval Car loan preapproval has many advantages, including putting you in the driver’s seat in negotiating the most favorable deal and obtaining the lowest interest rates. Confidence Dealerships can feel intimidating, and the purchase process can be a daunting one. Making the decision with an approved loan offer in hand gives an additional layer of confidence and convenience. With an approved loan you have a clear idea of your loan period and interest rate. This information makes it much easier to calculate your monthly payment in relation to the price you negotiate with a dealer. Instead of stressing about finding car financing, you can focus on what you want and how you live your life. Protect yourself from unnecessary extras closing a deal on the car, especially when purchasing a car with dealer financing and the sales team will often try to maximize their profit. It could include things such as rust-proofing the vehicle and fabric protection, as well as extended warranties. By coming in with an auto loan and having a specific number in mind. This can make it much easy to decline any additional expenses that aren’t included in your budget for shopping when it comes time to close the deal. Better grasp on expected cost The true tends to be higher than what you would expect for buyers who are first-time buyers. A solid number for what you are able to borrow will make it simpler to budget and keep your expectations grounded while shopping. Consider potential auto loans prior to time so you know how much you can comfortably get. And when calculating your monthly costs make sure you include the cost of auto insurance. You could also look for insurance quotes for the car you’re contemplating buying to ensure you understand what the true total cost is. Stronger negotiation power Although dealer financing is a good idea for some drivers, preapproval ensures that you won’t to use the finance options suggested by the salesperson. Dealers will also be aware of your determination to purchase a car and are likely to be looking to gain your business. They may even be able to offer the most competitive rates from their lenders’ network. What next steps to take if you’re planning to go car shopping, getting preapproved for an auto loan will give you an estimate of the amount you’ll be able to spend. It also puts you in control when it’s time to negotiate. Before submitting your preapproval application make sure you have all the required documents. If you intend to submit your application online, be sure to research the credibility of your lender. One of the most effective ways to check this are by looking up the lender’s Google reviews by past customers, and analyzing their score with the Better Business Bureau and Trustpilot.
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Written by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers to navigate the ins and outs of securely borrowing money to purchase an automobile.
Editor: Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers gain confidence to manage their finances by providing precise, well-studied information that breaks down complex subjects into digestible pieces.
Auto loans editor
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