- Getting preapproved for an auto loan gives you better negotiating power, allowing you to focus on negotiating price instead of figuring out financing.
- It also saves time and reduces stress.
- Finally, getting preapproved protects your credit because it reduces the number of hard inquiries, which can lower your score.
Thinking about buying a new vehicle but dreading the hassle of the buying process? There are a few things you can do to make things easier before you head to the dealership.
Getting preapproved for your auto loan lets you focus negotiations on getting the best deal possible instead of trying to figure out financing.
What is a preapproved auto loan?
With a preapproval, a lender gives you the okay to borrow up to a certain amount to buy a vehicle. The preapproval gives you the flexibility to shop for vehicles that fit your budget. By getting preapproved for an auto loan, you know exactly how much you can spend and how much your monthly payment will be before you negotiate the purchase.
How does getting preapproved for an auto loan work?
A preapproved loan is not a loan itself, but it’s a way of knowing that the lender intends to give you a loan to buy a vehicle. When you apply for a preapproval on an auto loan, you let the lender know how much you want to borrow and how long you want to have to repay it. The length of the loan is called the term. You also authorize the lender to pull your credit; the lender may ask to verify your income. Then they will let you know if you are preapproved for the loan, and what your interest rate and monthly payment will be over the life of the loan.
Once you are preapproved, you are free to shop for your vehicle. Note that preapprovals are valid for a limited time. If you wait too long, you may have to reapply.
Did You Know?
You can get preapproved for boat, RV, motorcycle, and other vehicle loans as well, and experience the same benefits.
Here are 5 potential advantages of getting preapproved for an auto loan
1. Less stress
Having a preapproved auto loan helps reduce stress, and lets you know exactly how much you can spend on the vehicle.
2. Saves time
When you are preapproved for your auto loan, you may spend less time at the dealer.
3. More negotiating power
Preapproval sets you up for better negotiating because you know exactly how much you can spend.
4. Better flexibility
Preapproval gives you flexibility to choose the vehicle and the dealer you want to work with.
5. Protects your credit
Getting preapproved through one lender (with one credit inquiry) is better for your credit than having multiple dealers check your credit as you shop around.
How can you get preapproved for an auto loan?
It’s a straightforward process, but here are four things you may want to do first.
1. Calculate how much you want to borrow
Some experts recommend spending no more than 15% of your take-home pay on a vehicle. That percentage includes other costs such as insurance, gas, and maintenance.
2. Consider your loan term
While a longer-term loan results in lower monthly payments, you likely want to manage the amount you pay in interest over time. Plus, you’ll probably want to avoid owing more money than your vehicle is worth. Consider the total interest you’ll pay over the life of the loan, then consider whether the vehicle you are looking at is worth the expense to you.
3. Get your credit ready
Because your interest rate and your ability to get preapproved for an auto loan depends on the lender’s perception of how well you can pay off the loan, start by making sure your credit score is accurate. Having good credit makes it more likely that you’ll get approved, so if you find errors, take time to fix them.
4. Make sure you qualify
While lender requirements vary, Global requires that you be:
- At least 18 years old
- A U.S. citizen or resident alien
- A member, or be eligible to become a member of Global Credit Union
How to apply for a preapproved auto loan
It’s easy to apply with Global online, over the phone, or in person. You’ll need the following:
- Social security number
- Physical and mailing address
- Employment information
- Gross monthly income
- Date of birth
Choose a requested loan amount and term and be sure to note that you want to get pre-approved.
Once you get preapproval, it’s time to shop for your vehicle. Be sure to bring your ID, proof of residence, and a copy of your preapproval notice.
Did you know?
What about those 0% financing deals? Only people with very good credit qualify for zero- or low-interest financing. If that’s you, and if you have the choice between 0% financing and a cash rebate, don’t automatically assume that 0% is the best deal. Take a few moments to compare the two. Depending on the rebate amount, the ‘free’ financing may cost you more over the life of the loan.
Auto loan preapproval FAQs
Where can you get preapproved for an auto loan?
You have many choices for auto loan preapproval. You can apply at a credit union like Global.
How long does it take to get preapproved for an auto loan?
This depends on the lender; some will give you an answer within a few minutes and others will take a few days. Global will usually give you feedback within 24 hours—often, even faster. Our preapproved car loans are typically valid for 60 days. This means you have 60 days to find a car and activate your loan.
Does preapproval guarantee an auto loan?
No. If anything changes in your situation (employment, credit rating, etc.), a lender can cancel their preapproval. However, that’s not common, so you should be approved when you or the dealer go to finalize the loan unless you’ve had a change in your status.
Loan Preapproval Helps You Drive a Good Bargain
When you walk in, ‘cash in hand’ with a preapproved auto loan, you can focus just on the total cost of the vehicle, which lets you drive away knowing you negotiated a solid deal. Apply for a preapproved auto loan with Global today.