The regular process of a car loan application normally implies a number of steps. First, you must find the right car and loan for you; afterwards, you have to apply and wait for the approval. On the other hand, opting for a pre-approval might make the process of purchasing a car more effortless.
Know how much you can spend
In more exact terms, instead of searching for the right car, and finding a loan according to that specific price, a pre-approval will indicate the amount of money you can actually borrow, taking into account your affordability and credit profile.
Negotiate the asking price
One of the main benefits that comes with a pre-approved car loan is that it allows the borrower to negotiate a better price on the vehicle. As you know the exact amount of money you are allowed to borrow, you can communicate that to the car dealer, you are ready to buy immediately, and, in this way, you can usually obtain a better price as you are a serious buyer.
Increase buying confidence
Moreover, another advantage is that you can take a more reasonable approach to the whole process of car browsing as you already know what kind of vehicles to base your search on. Additionally, having peace of mind that you have the money pre-approved allows you to act fast when that right vehicle comes along. This becomes more important if its a used vehicle as they are all unique.
How does a pre-approved car loan function
The majority of lenders that provide pre-approved car loans will evaluate your financial situation, and offer you information regarding the amount of money you can borrow, the amount of interest attached to the loan and what kind of repayments you are likely to pay.
Generally speaking, a pre-approval doesn’t embody any obligation on behalf of the borrower. Also, you can renew your pre-approved car loan for 30 additional days.
In most cases, lenders don’t choose to finance all types of cars. First, they need to make sure that the vehicle meets its age restrictions. Generally speaking, a lender will not allow for a vehicle to be older than 15 years at the end of the loan. Most financiers are happy to finance a car that comes from an auction house, franchised dealership and independent used car dealer.
Private sales are little more tricky, and not all financiers are comfortable in financing cars that are being sold privately. This usually comes down to the natural additional risks associated mainly relating to warranties & potential fraud. Technology and a national public Personal Property Security Register has eliminated some of that risk but nevertherless there are still risks associated with a private sales compared to a dealer sale.
All in all, getting a car loan pre-approval is worth it, because the benefits far outweigh the drawbacks. With a pre-approved loan, you are sure you will have the money you need. Also, even though you may not end up with the car you dreamed about, you are going to get a great deal on one.