Knowing how much you can spend on your next car can help you decide on which model, trim level, and even brand you can afford. If you aren’t sure about how much you can spend on your next car, getting pre-approved for a loan will put your mind to rest and help you make decisions with more certainty. Learn more about the benefits of getting pre-approved for a loan and how you can get started with the process.
The Benefits of Getting Pre-Approved For an Auto Loan
One of the best advantages to pre-approval on a car loan is that you’re able to realistically assess how expensive of a car you can afford, but the benefits don’t end there. You’ll also enjoy knowing that you got the best interest rate possible on your loan because you shopped elsewhere for the loan.
While it’s convenient to go with the dealer’s financing, you need to be aware that this convenience can cost you in the long run. When you finance through the dealership, they usually add a couple of percentage points to the interest rate because they work with particular lenders who have pre-determined rates. You can always ask later, and the dealership might even be able to give you a better rate than what you found on your own, but this shouldn’t be your first and only option. You also strengthen your negotiating power because you’re more like a cash buyer.
How To Get Pre-Approved For a Car Loan
Getting pre-approved for a loan is important, especially if you have spotty credit because this can help you deal with one of the bigger hurdles. One of the first steps to getting pre-approved for a car loan is to know your credit score. Taking a good look at your credit history will help you identify if anything on it was incorrectly reported, which can help you raise your score. You might also find out that you’re surprised about your credit score in a positive way. If you have less-than-perfect credit, it’s still possible to get a loan, but you’ll likely end up paying a higher interest rate, have a shorter financing term, or have to make a larger down payment.
You can also get a loan now and work on your credit so that you can refinance at a later date. There are many refinance auto loans available that can lower the total amount that you pay for your vehicle, and companies like Lantern by SoFi can help you compare options quickly and accurately because they have experience with auto loans. There are many times when you might choose to refinance an existing auto loan. According to Lantern by SoFi, one of these times is when, “your credit, income, or debt-to-income ratio have greatly improved.”
Regardless of whether your credit is exceptional or not that great, you have options to shop around for a loan, but you should apply for multiple loans within about 14 days of each other so that they all show up as only one credit inquiry on your credit report. Finally, remember that you can also recruit a co-signer if you have poor credit or you’re young and haven’t had the time to build up much credit.
When you want to buy a car, getting pre-approved for a loan has a lot of benefits, and people with a range of credit scores can get approved. There are many places that you can get approved, and going to a place other than the dealership could save you hundreds of dollars throughout the life of the loan.
