Pre Approved Car Loan: Advantages and Disadvantages
When you walk into a dealership having a pre-approved car loan, it provides you the confidence to push your bargaining power to achieve the best rates possible. It also helps you determine your budget but it can limit how much money you can use to purchase a new car.
What is Pre Approved Car Loan?
Having been able to receive pre-approval for a car loan implies that you are all set to purchase the car. You primarily have the money to make the purchase. It entails a hard credit assessment that briefly reduces your credit standing however provides you with more power to deal at the car dealership.
Prequalifying is Not Pre Approval
Prequalifying is advantageous for those who only want to have a knowledge of which terms and rate they’re qualified to apply for with a loan company. It entails a soft credit check which provides you with an idea of the car loan you may get once you submit an application. It is useful when you compare loan companies, however, it will not provide you with control when negotiating car deals.
How to Get Pre Approval For Your Car Loan
Look for loan companies who will assess your financial position to find out the amount you are able to borrow. You can apply for an auto loan online, in person or over the phone. Provide the following information below:
- Secure a copy of your credit score
- Make sure you have your personal information and income details
- Compare various loan products that you could submit an application for
- Call the bank or loan company you intend to fill out an application with
- Look around for better deals
What is Conditional Approval for a Car Loan?
Conditional approval is offered prior to preapproval of car loan. Using the data you provide the lending company, you are provided a highest possible loan amount. You will need to wait around to obtain details like interest rates and loan term. Once the loan company approves your loan application to purchase a particular vehicle, this is called unconditional approval.
Benefits of Pre Approved Car Loan
- Assures you of your financial position thus making you confident to go on with the car purchase.
- Boosts your bargaining power. You can confidently negotiate better deals with knowing that you have the upper hand in dealerships.
- Obtain a reduced interest rate. When the preapproved loan includes an interest rate, you can deal with the car dealership to see if they could provide you with a more reasonably competitive in-house financing package.
- Fixed interest. With a fixed interest rate, you can keep a spending budget without needing to stress about market movements that can raise the existing interest rate.
Drawbacks of Pre Approved Car Loan
- Approval time is short. Car loan preapproval often is offered for a limited time.
- Restricted budget. Since you have already been preapproved for an arranged amount, your car choices could be constrained.
- Smaller market. There are very few loan companies that provide preapproval when compared to regular car loans.
- Secured loan. Your loan comes with the condition to use the car as security in case your credit is inadequate. In such cases, the car is going to be taken back should you be unable to meet repayments.
You will want to get pre approval car loan for many of its benefits. Mainly, When you enter a car dealership having a pre-approved car loan, you are ready to grab the best deal and can also negotiate an ideal price and interest rate that works for you with confidence. Note that a preapproval is not a commitment, therefore if the car dealership can provide you with that lower rate, go ahead and grab it. Should you be unable to get a considerably better bargain, you can look for another car dealership that can work with you.
