How Does Auto Loan Preapproval & Prequalification Work?
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What Does Preapproval Mean?
What Does Prequalifying for a Car Loan Mean?
Preapproval vs Prequalification
What Are the Benefits of Getting Preapproved?
1. It Can Reduce Purchasing Guesswork
2. It May Create Negotiating Power
3. It Can Help You Avoid Upsells
Are There Any Disadvantages to Preapproval?
How Do You Get Preapproved for a Car Loan?
1. Estimate Your Budget
2. Review Your Credit Report
3. Gather Information About Your Ability to Pay
Proof of employment status W-2s and any other income verification information Social Security number Identifying documents, such as driver’s license, military ID, state ID, or passport Proof of assets
4. Review Loan Preapproval Terms
Loan amount: This is the total amount you can borrow. You can generally take out less money, if you so choose, since this may be more than you want to take out or may require higher monthly payments than you can make. Loan term: This is how long you will be paying the loan back. Interest rate and APR: This will let you know how much the loan is costing you. Monthly payments: This is how much you will have to pay the lender back each month.
5. Shop Around For the Best Loan Offer
6. Hit the Dealership Floor
Who Can Preapprove You for a Car Loan?
Banks Credit unions Private lenders Set your budget, including your target purchase price Check your credit report and scores before car loan shopping Consider whether you’ll need a cosigner Shop for car loans from multiple sources Consider getting prequalified or preapproved Read the fine print before committing to an auto loan
What Are the Benefits of Getting Prequalified?
1. You Get a Take on What You Qualify for
2. It Gives You a Sense of Your Budget Limits
3. It Doesn’t Impact Your Credit Score
Are There Any Disadvantages to Getting Prequalified?
How Do You Get Prequalified?
1. Determine Your Budget
2. Gather Information for Lenders
3. Pay Close Attention to the Loan Terms
Loan amount: How much you can borrow from the lender Loan term: How long you’ll have to repay the loan Interest rate and APR: How much you’ll pay the lender to finance the loan each month, and what fees and other costs might be involved Monthly payments: Your minimum monthly payment over the loan’s lifespan
Frequently Asked Questions
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