When shopping for a car loan it seems like everywhere you look there is an advertisement screaming at you that you can “get pre-approved now!” But is this really the case? This may not be the case, especially if you are in need of a loan and your credit is not perfect.
What is a car loan pre-approval?
A pre-approval for a car loan is a conditional approval from a direct lender with the estimated conditions built in. This allows you to buy a vehicle from a dealership or privately and know how much you can spend.
Pre-approvals come from direct lenders, such as a bank, credit union, or online lender. You can try to get pre-approved, but one major downside is that it can be difficult to qualify. Generally, pre-approved loans are reserved for people with good credit.
However, if you are able to qualify, it can be a great option to facilitate car loan negotiations at the dealership. When you are pre-approved, the lender usually gives you a check to give to the dealership. All you have to do is choose a vehicle that fits your budget and the amount of which is equal to or less than the maximum amount of the check. There is no haggling over interest rates or down payments in this case.
Direct loan vs indirect loan
If you are considering trying to lend directly as a borrower with bad credit, you may have better luck with a credit union, especially if you have an account in good standing. Credit unions are non-profit organizations and tend to pass these savings on to their members – often in the form of lower loan interest rates. If you are a member of a bank you may still be in luck, however, banks tend to reserve their loans and best rates for people with good credit.
Since direct loan is not always an option with bad credit, an alternative is to find an indirect loan. When you get an indirect loan, you work with a dealer’s finance department, and they work with a lender on your behalf. The advantage is that some dealerships work with subprime lenders, who are equipped to help people with less than perfect credit.
Lenders at risk look more than your credit score to get approved for a car loan. Other factors they take into account are your income, employment and residency history, and your ability to make a down payment. These items help these lenders determine if you have the capacity, stability, and willingness to take out a car loan.
Auto loan pre-approval tips
At the same time, the pre-approval is definitely worth it, especially if your credit is only slightly below the typical good credit score range (usually around 670). As with any loan, it is best to be prepared before diving.
Here are some tips to help you prepare for the pre-approval process:
- Know where your credit is – Knowing your credit isn’t just about your credit score. Your credit score is based on the information in your credit reports, and you need to make sure that you know what is on them. If your credit score is in the mid-600s, but there is a recent repossession or bankruptcy on your credit reports, it may be more difficult to qualify for pre-approval. Knowing your credit also gives you the ability to do some research online and find out what rates and terms you might get in your situation.
- Put your documents in order – Whether you are applying for a direct loan or a subprime auto loan, there is usually some form of the required documentation if you have bad credit. Make sure you have proof of income, residence and employment. In some cases, pre-approval requires that you know what you intend to buy. This means having the year, make, model and price of the car you are considering.
- Buy the best rate – Rate finding is a process of applying for the same type of loan from various lenders within a short period of time, usually 14 days. Buying rates can be more difficult with bad credit because not all lenders work with people in these credit situations. However, it’s still a good idea to give it a try. When you review the store, all credit requests for the same type of loan during that two-week period only count as one serious request and have less of an impact on your credit score than if you were to make one. request from several lenders over a longer period. Frame.
- Consider where you are applying – Before you start applying for a direct loan from every financial institution you come across, seriously consider your options. If you are a member in good standing of a credit union, you may want to start there and then move on to applying from online lenders. However, if you have been working at the same bank for a long time, they may be a better option. Wherever you decide to start applying for pre-approval, remember that this is only an option when you need a car loan.
Can’t qualify for pre-approval?
If the pre-approval isn’t in the cards for you, no matter how hard you’ve tried, don’t give up hope. Pre-approval can be a great way to find out what you need to work on to get a car loan, but it’s not the only option for people with poor credit. In fact, getting a subprime car loan may be exactly what you are looking for.
Lenders who offer these types of loans see you as more than just a number and know that a loan can not only get you the vehicle you need, but also be the key to repairing your credit. If you’re not sure where to turn to find a subprime lender, we want to help.
AT Auto Express Credit, We work with a nationwide network of special finance dealers who are registered with subprime lenders who can help people with unique credit situations. The process is easy to start and there is never any obligation to purchase. Let us help you find a local dealer – fill out our auto loan application form to start now!