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How To Get A Pre-Approved Car Loan

When applying for a car loan, prospective borrowers have numerous options to choose from including banks, credit unions, and private lenders. Car loans are also available from car dealerships and are typically negotiated at the time of purchase. However, most financial consultants recommend having a pre-approved car loan already arranged before going to a dealership. That way, buyers have the advantage of knowing how much they can truly afford to spend on a car before they begin negotiating with a dealer. Keep in mind that having a pre-approved car loan does not put you under any obligation to use that loan. If the dealer offers you a better interest rate, you can take the loan from them instead – the terms of a pre-approved loan only go into effect once you actually purchase the car and your lender pays the dealer the purchase price, which you will then repay to the lender. Getting a pre-approved car loan involves a series of steps and necessitates a certain amount of shopping around. Different lenders offer different interest rates and loan terms, so it is worth considering all of your options before making a final decision. 1. Make a Realistic Budget: Before you apply for a pre-approved car loan, it is important to take a good look at your financial position to determine what you can realistically afford to spend on a car, and not solely in terms of the vehicle’s purchase price, but more crucially, in terms of what you can afford to spend on monthly car loan payments. Owning a car is always an expensive proposition, given the costs of maintenance, gas, and insurance, and these expenses also need to be taken into account when deciding on your budget. Your car purchase will also include other costs such as processing and title fees, all of which need to be accounted for as well. Knowing what you can realistically afford to spend on monthly car payments will help guide your search toward the right lender for you. 2. Check your Credit: Apart from employment history, one of the key factors that goes into a lender’s loan decision is a prospective borrower’s credit history. Checking your credit score to ensure that there are no reporting mistakes is one way to improve your chances of getting pre-approved for a loan. It is also important to pay off any debts that you might have, such as credit card or utility bills. In some cases, it might be worthwhile to wait a few months for your credit score to reflect paid debts and other adjustments before actually applying for a pre-approved car loan. 3. Online Estimates: Many lenders offer prospective borrowers online tools which they can use to receive free estimates on car loan rates. These are rough estimates as they are based on your general credit rating as reported by you, (poor, fair, good, or excellent), but they are nonetheless a good gauge of the rates you can expect to receive. Some sites also offer multi-lender comparison tools, which offer prospective borrowers car loan estimates from numerous lenders simultaneously. Remember to shop around before settling on a lender for your pre-approved car loan. Apply for car loans from multiple lenders in your area, including your bank or credit union, and make sure that whichever lender you decide on can offer you terms that truly suit your budgetary needs.
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