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How to get preapproved for an auto loan and gain negotiation power Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by providing you with interactive financial calculators and tools as well as publishing original and impartial content. We also allow you to conduct research and analyze information for free to help you make financial decisions with confidence. Bankrate has agreements with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that appear on this site are from companies that compensate us. This compensation could affect how and when products are featured on this site, including, for example, the order in which they may appear in the listing categories in the event that they are not permitted by law. This applies to our mortgage or home equity products, as well as other home loan products. However, this compensation will not influence the content we publish or the reviews you read on this site. We do not include the entire universe of businesses or financial offers that may be open to you.
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4 min read Published on March 7, 2023.
Authored by Rebecca Betterton Written by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers with the details of taking out loans to purchase the car they want.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate since late 2021. They are committed to helping readers gain the confidence to take control of their finances with precise, well-studied information that breaks down complicated subjects into bite-sized pieces.
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When it comes to negotiations, you should do all you can to control negotiations. Making an application for auto loan preapproval is a way to gain an advantage when purchasing a vehicle. Taking this step means that an aspiring lender has reviewed your credit history, application and other required documents and is willing to give you an official loan offer in a certain amount. This is , though the terms are sometimes used in conjunction. When you’re prequalified for a loan then the lender will only conduct a soft credit check, and approval isn’t confirmed until you complete the complete application. Being preapproved for the car loan just takes a few minutes of additional time and ensures that you’ve got a solid idea of how much you’ll be spending when you go car shopping and what you’ll receive. Step 1. Gather the required documents may be preapproved for an auto loan via online lenders, banks or credit unions. Whichever option you choose the first step is making sure you have the required documents for your application. These include: Personal information, like names, Social Security number, driver’s license, information about your contact and your home address. Income, including your employer’s contact information , and the amount you earn each year. The documentation for income you could be required to supply could include the W-2, tax return and pay stubs. The amount you’d like to finance and the preferred auto loan duration. Information on the age and mileage of the car in the event that you are purchasing a used. Information about trade-ins in the event of a trade-in. Bankrate tip
To make the application process easier, you should gather the necessary financial documents ahead of time and save them in PDF files on your computer.
Step 2. Find out about loan options Similar to how you shop around for your vehicle, it’s also an excellent idea to shop around for loan options . Your interest rates are dependent on your credit score along with other aspects that could differ by lender. By shopping around, you may be able to get better rates, and also get better loan conditions. Securing an interest rate that’s even a tenth of a percentage point lower could have a huge impact on the amount you’ll pay throughout the duration of the loan. For the best rate apply with multiple lenders. Bankrate’s tip
Take a look at Bankrate’s top picks for the to start your search.
3. Send in the preapproval request In most cases, the application process is similar to the typical full loan application. It is possible to apply online, over the telephone or in person. If you choose to submit online, make sure you research the most reliable lenders. However you decide to submit your application — online or in person you should expect to take around 15 minutes to complete every application. Certain lenders offer an comprehensive preapproval procedure, and some may require an absolute credit score or information regarding the age of your vehicle and mileage. Find out more information about the application requirements on lender websites prior to submitting an application. After you’ve filled out the required information, most applications are typically processed within 30 minutes. Bankrate tip
After your loan is approved generally, you get 30 to 60 days to shop for a vehicle before the loan deal expires.
Benefits of auto loan preapproval Car loan preapproval has many advantages which include putting you in the driver’s seat in negotiating the best price and the most competitive interest rates available. Trust Dealerships can be overwhelming, and the car-buying process can be daunting. Entering this process with a preapproved loan offer in hand offers the buyer a sense of security and ease. With a preapproved loan, you already know your loan duration and the interest rate. This information makes it much easier to determine your monthly payments according to the purchase price you agree to with the dealer. Instead of stressing about finding the right financing for your vehicle that you are not interested in, focus on what you want and how you live your life. Protection from unnecessary add-ons when making a deal for the car, especially when you purchase a vehicle that is financing by a dealer and the sales team tends to make it easier for them to increase their profit. This might include such extras as rust-proofing the vehicle or fabric protection as well as extended warranties. When you apply for an approved auto loan, you already have an established number in mind. This will make it easy to decline extra costs that aren’t in your budget for purchases when it’s time to finalize the sale. Better grasp on expected cost The actual cost is usually higher than what you would expect for first-time buyers. A clear estimate of what you can borrow makes it easier to budget and keep your expectations grounded when you shop. Consider potential auto loans ahead of time to determine the amount you are able to comfortably get. Also, when you are calculating your monthly expenses, don’t forget to include the expense of auto insurance. You might even shop around for insurance quotes for the vehicle you’re considering buying so that you know what the actual, full cost will be. Stronger negotiation power Although dealership financing can be beneficial for some drivers, preapproval ensures that you won’t to use the finance options suggested by the salesperson. Dealers will also see your determination to purchase a vehicle and will likely seek to win your business. They might also be able to provide a more competitive rate from their network of lenders. What next steps to take if you’re planning to shop for a car and are preapproved on a car loan will give you a firm estimate of the amount you’ll need to pay. This puts you in the driver’s seat when it comes time to bargain. Before submitting your application for preapproval be sure to gather all the documents you need. And if you plan to submit your application online, make sure to research the credibility of your lender. Some of the best ways to accomplish this is by checking a lender’s Google reviews from past customers, and analyzing their rating with The Better Business Bureau and Trustpilot.
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Writen by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers to navigate the ways and pitfalls of taking out loans to purchase an automobile.
Editor: Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain confidence to manage their finances with clear, well-researched data that can break otherwise complex subjects into digestible pieces.
Auto loans editor
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