Should I get pre-approved for a car loan?

In the current Covid crisis, it may be a good idea to get pre-approved for car finance beforehand to avoid overspending when looking for your next vehicle.

What is pre-approval for a car loan?

A pre-approval for a car loan is when a lender agrees to let you borrow a certain amount of money to buy a car. The process is similar to other applications where your financial circumstances are taken into consideration to determine your borrowing capacity.

What are the benefits of getting pre-approved for a car loan?

There are many benefits of getting pre-approved for car finance.

Makes you aware of your budget limitations

A pre-approval essentially tells you that you can get a car loan for a specific amount based on your liabilities, assets and current credit rating. This gives you a better picture of your finances and budget limitations. You get a better idea of what price range you can afford before you research online or visit a dealership, so you don’t end up overspending.

Speeds up the car buying process

A pre-approval for a car loan speeds up the process of buying a car since you know how much you can spend. This is because you won’t waste time looking for vehicles you may or may not be able to afford. Dealers too won’t try to show you more expensive cars since you already have a set budget.

Does not lock you into one lender

The good thing about a pre-approval is you don’t have to be locked into one lender if you don’t want it. You can get in touch with different lenders if needed. You could even talk to your dealer about financing options to see if you can get a competitive rate. The benefit of a pre-approval is you have an idea of how much you can borrow and at what interest rate. You can use this to negotiate a better deal with your dealer if needed.

How to get pre-approved for a car loan?

Now that you have an idea of the benefits of getting pre-approved, here are some ways to make the process easier.

Check your credit history

Lenders will always review your credit history and rating before pre-approving you for any loan because it helps them determine how easy it is for you to repay over time. Checking your credit history will help to ensure no surprises come up when the lender checks your information. If your credit history is poor, this is a good time to improve it by clearing off debts and paying bills on time, before applying for pre-approval.

Put together all your necessary paperwork

In order to get pre-approved for a car loan, you will need to put together important paperwork related to your financial situation. This puts you in a good position to get approved faster. Paperwork you will need include your identity, income, credit history, assets and liabilities, employment information and day-to-day expenses. This helps the lender make an informed decision about how much to lend you.

Get access to multiple lenders

Getting access to multiple lenders through an online broker can help you shop around for the best interest rates and loan terms available in the market. This is perhaps the best way to get a great deal without being locked into just one lender or dealer.

In a nutshell,

Getting pre-approved for car finance helps you compare between different lenders and set an affordable budget.

Shop for Cars has partnered with Drive On Finance, which connects you to 40 lenders through a single loan application. You complete the entire process online to help you get the best finance deal possible, which means you don’t have to worry about physical contact in today’s socially distanced world. Shop for Cars is the easiest way to help you find some of the best used cars for sale from licensed and trusted dealerships around the country.

*Getting pre-approved for finance doesn’t mean you’re guaranteed a loan. This is a conditional approval. The lender will ultimately evaluate your application and provide final unconditional approval once you finalise the car model, make and provide all additional details as requested by your lender.

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