Things to Know About Pre-approved Car Loans

So you’ve finally decided to get that new set of wheels and in your brief search about the process, the word “pre-approved” keeps popping up. What does it mean? How does it affect the car you want to acquire or the loan to make the purchase? This article fully explains what a pre-approved loan means and how it may benefit your goal of owning a new car.

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Written by: Piggyy

What is a Pre-approved Car Loan?


A pre-approved car loan is a good sign of approval from a lender that you are qualified to tender an application for a car loan. A pre-approval also comes with terms like the amount you can apply for, interest rate and loan term based on the lender’s evaluation of your creditworthiness. This would give you a feel of the total cost of the loan and aid your budgeting before you actually start looking around for a car.


A pre-approved car loan shows dealers that you are committed and ready to make the purchase. In addition, there is no need to request for in-house financing which practically gives you some leverage when negotiating with the dealer. No matter what you’ve read about the pre-approval car loan process, getting pre-approved for it is actually simple and easy if you have a good credit rating and the required documents.


Benefits of Getting Pre-Approved for a Car Loan


Getting pre-approved for a car loan can be beneficial in many ways. Here are a few reasons why you should consider getting pre-approved for a car loan.



It allows you to know exactly how much your car loan will cost you and how much you can borrow. It will also help you work on your budget and plan ahead accordingly, avoiding any surprises when you’re making the purchase.



It helps you save time and energy in searching for the right car for you and your budget. Instead of going around asking different dealers about their financing options, you can just wait for your pre-approval letter and go ahead with your purchase. 



It gives you a good feeling of security when you are negotiating with a dealer. It also allows you to make a better decision on what car to buy and what interest rate you should pay. In contrast, you might end up paying too much for the car or settling for a loan with a high interest rate.



It gives you some bargaining power when negotiating with the dealer as you will be armed with a good knowledge of the car you want to buy and the best loan option for you. This gives you the leverage to negotiate for a better deal.



It helps you make a better decision on what car to buy and the loan you want to take. You can also decide whether you want to go for a loan with a lower interest rate or a loan with a higher interest rate but with a longer loan term.

Frequently asked questions

How to get pre-approved for a car loan?

Lenders will usually check your credit history, bank account, and employment records to determine whether you are a good candidate for a car loan. They will also take into consideration the amount of money you can borrow, the interest rate, and the loan term. It is important that you are ready to provide the required documents and have a good credit score.

Can I use my pre-approved car loan to purchase from a private seller?

Some lenders will require that you purchase your vehicle from an authorized dealership. However, there are also other lending institutions that are more flexible in terms of allowing you to purchase from a private seller. It is best to check with your lender to know more about their policies.

Is it necessary to get multiple pre-approved car loan offers?

It is recommended to get multiple pre-approved car loan offers to ensure that you are getting the best deal. Moreover, the interest rate and loan term will vary depending on the lender.

What if I can't get a pre-approved car loan?

Talk to your lender to know what can be done to help you get pre-approved for a car loan. If this does not work, ask the lender if you can get an alternate loan option.



From the foregoing, it is clear that a pre-approval will greatly aid your car purchase experience. You can walk into the dealership knowing the price range of the car you want without falling for vendor tactics. Therefore, planning before taking action would benefit you in the end.


״The secret of happiness, is not found in seeking more, but in developing the capacity to enjoy less״ - Socrates

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