A pre-approved car loan is a car loan that’s conditionally approved by a particular financial institution before you go to your preferred car dealership to purchase your new vehicle. This loan is conditionally approved since the lender will inquire about the car you’re buying and the exact amount you’re borrowing before completing the car loan paperwork.
Most car loan pre-approvals have a maximum approximate amount of money you’re allowed to borrow, and they will generally give you an idea of how you will service the loan. In order to get a pre-approved car loan, you’ll have to go through the typical loan application and approval process. Nowadays, you can quickly get a pre-approved auto loan and set up an automatic repayment schedule without ever leaving your house, although some institutions will need you to sign the loan paperwork before approval.
Advantages of Using Pre-Approved Car Loans
-Buyer flexibility: A pre-approved auto loan gives you the freedom of purchasing a vehicle almost anywhere. Since you already have the financing, you can easily shop around auto dealers like a cash buyer. Most pre-approved auto loan lenders only approve loans for cars that are purchased at franchised dealerships. Though, some lenders allow you to shop anywhere, be it a private seller or an independent dealership.
Second, pre-approved loans allow you to compare interest rates. Getting your car loan request pre-approved doesn’t mean that you have the best rates in the market. Pre-approval gives you time to compare and settle for the best rates in the market. You can also assess if you’re settling for a good deal or not by comparing other loan aspects, including the repayment period and any extra fees. More extended repayment periods have higher rates than short ones. In most cases, the loan dealer will match their percentage to the rates offered by their competitors or offer you slightly lower ones. It’s up to you to decide whether you’ll accept it or not.
Faster loan processing: Processing: a pre-approved auto loan is faster compared to other types of loan. This is because the financial institution responsible for offering you the loan already has your details, thus saving the amount of time spent in gathering personal information.