Key Things To Know Before You Apply
Americans on average will own between six and ten cars during their lifetime. Having a clear and confident understanding of what it takes to buy a vehicle will make it less stressful every time you get a new car or truck. Getting pre-approved for an auto loan is the most practical way to start because it puts you in the driver’s seat when it comes to the car-buying process. In this blog, we’ll discuss the steps to get pre-approved for a vehicle loan, and how doing so helps improve your purchasing experience.
What Is Auto Loan Pre-Approval?
An auto loan pre-approval is a conditional loan approved by a financial institution or lender that defines the loan amount, interest rate and payment term that is being offered to the borrower, according to Bankrate.com. Getting pre-approved helps borrowers know how much of an loan they can afford so they can shop confidently within their price range. They’ll also have a good idea how much their loan payments will be.
The offer is usually good for a short period of time. It will remain valid as long as there are no drastic changes to the borrower’s financial standing. Such changes include any increases to the debt-to-income ratio, decreases in credit score or changes in income.
What To Do Prior to a Pre-Approval
- Check Your Credit Score: Having a clear understanding of your credit score will help determine if you’re ready to be pre-approved for an auto loan. The higher the credit score, the better your chances of being offered a lower interest rate, a higher loan amount and lower monthly payments. To review your credit score and history, visit AnnualCreditReport.com where you can get a free report each year.
- Gather Documents: Before you apply, be sure you have all your necessary documents at hand. They include your most recent pay stubs, employer information, personal information and government-issued identification. Having these documents and information readily available will make the pre-approval process quicker so you can get on to shopping for a vehicle.
How Does Pre-Approval Improve Your Car-Buying Experience?
Getting a pre-approval can help make your car-buying journey much easier because it helps you stick to a budget that fits your financial life. Since you won’t have to finance with the dealership, you’ll be in a better position to negotiate an out-the-door price, as well as be in a better position to decline additional markups, according to NerdWallet.
Things To Watch for With Pre-Approvals
Do your research and shop around for lenders with the best interest rates, says Bankrate.com. Carefully review the loan terms to ensure you understand how the loan works. Go over the steps of the pre-approval process so you’ll know what to do once you find the vehicle you want to buy.
Remember to stay within your loan limits or risk the loan being denied. Your pre-approval will only be valid for 30 to 60 days. At the dealership, negotiate the purchase price and not the monthly payment. If you’re upside down on a current auto loan (owe more than your current car is worth), you may not be able to roll that negative equity into your pre-approval. Also, you’re not obligated to accept the pre-approval loan if you decide not to buy a car at this time or find better financing elsewhere.
How TCU Can Help
Travis Credit Union has the tools, resources and people to help you with a lifetime of vehicle purchases. With competitive auto loan rates, a simple application process and local expert advice, you can get pre-approved and shop with confidence. TCU also has insurance products to help protect your vehicle.
Our free, online pre-qualification tool will let you see if you’re already pre-approved for a loan without impacting your credit. Plus, TCU offers discounts on auto loans for members and automatic loan payments. Get pre-approved with TCU for your car or truck today!