The conventional car loan process involves looking for a car to buy then looking for financing to be able to buy it. With pre-approved car loan, a lender pre approves a certain amount of money which you can use to buy a car. This is beneficial because you already know how much you can spend for a car thus giving you more bargaining power when determining the total loan amount with the dealership.
If you want to get started right away, fill out the form and we’ll help you through the process.
How does the pre-approval process work?
Much like the conventional car loan process, your credit history and financial statements will be evaluated in order to determine the amount you can borrow. Once pre-approved, you can now go to dealerships and look for a car that fits your needs and budget.
Not all lenders offer pre-approval. You may have to shop around for those that do. Alternatively, you can speak with a finance broker who knows which banks and lenders offer pre-approved car loans.
Loan comparison is also available since different lenders may offer different loan amounts and different interest rates.
What are the documents needed for a pre-approved car loan?
The required documents may vary from lender to lender but, in general, you will need a copy of your credit score, statements of income, expenses, and liabilities. Some lenders also require a minimum pre-tax income and a certain debt-to-income ratio (DTI). The percentage of DTI varies from lender to lender but it is always best to keep it at 45% or less if you want to apply for a pre approved car loan. One very good way to immediately improve your debt-to-income ratio is by paying off credit card debts.
As discussed previously, your finance broker can take care of all these details for you.
It is advisable to maintain your credit score by making a minimum of credit enquiries. A good payment history will also assist before applying for a pre-approved car loan. The amount of loan you may potentially be pre-approved for will depend on your credit score and financial statements.
Benefits of a pre-approved car loan?
- Increased confidence when visiting dealerships knowing that you already have a set budget for a new car.
- Better bargaining power when negotiating a price.
How long is the validity of a pre-approved car loan?
Pre approvals are typically valid for 30 days as your credit standing can change within this time period. If an extension is needed, a re-assessment will be performed.
Is an upfront payment required to get pre-approved?
Though it is possible to get 100% financing, it is advisable to pay at least 10% upfront to lower your interest payments. You may also get a lower interest rate if you pay more money upfront.
Can a pre-approved car loan be used on a private sale vehicle?
Yes. Just like a conventional car loan, you can use it to buy from dealerships, private sale, and even at an auction. Limitations as far as age, make, and condition of the vehicle will be stipulated in the contract.
How to Apply for a Pre-Approved Car Loan?
Online applications are the easiest way to get started with the process. Finance brokers can save time by helping you get quotes from different lenders with just one application. Once all quotes are received, all you need to do is choose the best option that suit your needs.