5 Little-Known Benefits of Pre-Qualified Auto Financing
Shopping for a new vehicle can be stressful and frustrating at times. Because of this, it’s important to take time to get the financial aspect sorted as early as possible.
Looking into pre-qualified auto financing can help make this process slightly easier. Keep reading to learn some of the benefits offered by being pre-qualified.
Pre-Qualification vs. Pre-Approval
Pre-approval means you have been approved for a loan up to a specific amount and for a set amount of time. During the pre-approval process, the lender has reviewed your information, including your credit report.
With a pre-qualification, you have a soft offer that could change once the lender reviews your credit history. Between the two, pre-approval is best.
- Know What You Can Borrow
Being pre-approved for an auto loan will help you set realistic expectations regarding what you can afford to spend. The lender provides you with a quote for the total amount you can borrow with auto loan pre-approval. This usually includes taxes, title, car, and other fees.
Knowing what you are pre-approved for before looking at vehicles in person or online through this link will help you only consider vehicles you can realistically afford.
You will also find out what the loan terms and interest rate will be. With this information, it is possible to calculate your monthly payment and budget accordingly.
It isn’t required that you apply for the maximum amount you are pre-approved to receive. In some cases, once you consider your other expenses and bigger financial situation, you may want to borrow less.
In the end, it’s up to you how much you can afford to borrow for your car purchase.
- Protection from Dealer Markups
While dealer financing is convenient, finance managers may take advantage of this if you haven’t shopped around. This is done by marking up your interest rate.
This may mean you pay one or two percentage points more than necessary. For the life of your loan, this may add up to hundreds of dollars.
When you are pre-approved, you know you have the best interest rate you can qualify for. Also, you will be able to determine if the dealer is giving you a good deal.
- Know if Your Credit Is Good Enough
It is frustrating to find the car you want, only to find out you can’t get an auto loan because of poor credit scores.
When you seek pre-qualification, you have an indication of if you will qualify for the loan or not. While this is true, you still must submit a loan application to find out if you are approved.
- Improved Negotiating Power
With pre-approval, you will know what rate you can qualify for (as mentioned above). If you are pre-approved for an auto loan, you are often treated as a cash buyer.
When it comes to negotiating the price for the vehicle you want, you will have a huge advantage. You will also be able to avoid upsell situations.
Even better, you can go to any dealer and compare offers. Salespeople know this and will be more willing to negotiate a better price.
With loan pre-approval, you can get the upper hand when shopping for a new car.
- Focus on the Vehicle
If you don’t take time to run the numbers before going to the dealership, you may get distracted and wonder how you can afford the monthly payments.
However, if you have a general idea of what you can spend ahead of time, you can focus on the vehicles that are within your budget. With this, you will feel more confident that your loan payments won’t cause a financial hardship down the road.
What Information Is Needed for Pre-Qualification?
Being pre-qualified for a loan is like getting pre-approved. Usually, a lender will require your personal information. They may also conduct a soft credit inquiry.
The personal information most lenders will require include:
- Current debt obligations
- Employment information
It will also be beneficial to have your driver’s license, housing payment amount, proof of income, and your Social Security number.
When a lender checks your credit, they will use a soft or hard inquiry. This is done to pull your credit score and reports.
Soft inquiries won’t impact your credit rating. A hard inquiry may have a small impact on your credit score.
If you shop around for the best rate, find out if the lender uses a soft or hard credit inquiry first.
Also, keep in mind that it may only count for a single inquiry if several inquiries are made in a 14- to 45-day period. This is dependent on the credit-scoring model, though.
Because of this, you may be able to find a better rate, all while minimizing the impact on your credit score.
Now You Know the Benefits of Pre-Qualified Auto Financing
If you want to buy a new car, looking into pre-qualified auto financing will pay off. It will offer all the benefits mentioned above, and more.
In the long run, with the information provided by pre-qualification, you can get a loan that offers terms that work with your budget and needs. Keep this in mind so you can find a quality lender for the car you really want.
When it comes to finding helpful information and resources, we have you covered. Our team posts blogs on an array of topics, including mind, body, fashion, and more. Be sure to check back often to find the new guides we have posted.