When you decide to buy a new car, you have to do a reality check on your finances. Ideally, all of us would like to have sufficient funds to purchase the car of our choice outright, but in reality, many of us may fall short in sufficient finance. The car dealer may even show us how we can get a car loan to help raise the capital for the car’s purchase. Here comes the Pre-Approved loans and they are helpful to manage and easily buy a car.
Here's everything you need to know about the Pre-Approved loans!
What is Pre-approved loan?
As discussed above, it's wiser to have the complete money to buy a car upfront rather than managing funds later in time. At this time, it is a wise idea to look for pre approved loans for your car. This type of car loan is a secured car loan, where the lender has agreed in principle to disburse a certain amount of loan to you. It does not mean that the loan has been given out just yet.
Why get pre-approved?
Pre-approved car financing is the closest you can get to feel empowered like a cash buyer for a car. There are many advantages of having a car loan pre approved.
Ø Get a budget check and price range
Once you know how much car loan is pre-approved for you, you can do a reality check on your total available budget and thus narrow down on the range of cars that you can afford.
Ø Understand your installment capacity
Pre approved loan is like a dry run of your actual loan process. It can give you an idea of the amount, frequency and period for repayment installments that you can manage.
Ø Better interest rate
A pre approved car loan usually offers better interest rates, since its normally a limited period offer and this can translate into good savings for you.
Ø Better negotiation and comparison
Once you are armed with a pre approved loan, you stand better chance to compare what other lenders are offering and even negotiate better rates. You can walk up to a car dealer with confidence and challenge its finance support wing to beat your pre approved rate, or else give you discounts and additional services with the car.
Ø Save time in actual finance and insurance offices
The processing time for pre approved car loans is much lesser and also it cuts down time and paperwork at the finance and insurance offices of the car dealer. One can also thwart off unnecessary and expensive additional schemes that these offices usually try to sell to you, citing budget limitations due to pre approved loan amount.
Ø Enhance your experience with the dealers
Once you have a pre approved loan with you, you can focus more on the shopping experience, rather than worrying about installments and interest rates and thus bargain on the actual car.
How to get pre-approval done?
To get pre approved for a car loan, you should do the following:
1. Check your credit history
Do a detailed survey on yourself, and your credit history across all banks and all channels. This is the first thing that the bank/lender will try to ascertain once you apply for pre approval.
2. Ensure that you can manage the payment installments
Carefully look at your income and expenditure. Then reach a rough estimate on how much installment payment capacity do you think you have.
3. Check your eligibility
Contact a lender and check how much loan amount are you eligible for. You can use one of the freely available online car loan eligibility calculator for validating the same.
4. Check out the various offers by multiple companies
It is not advisable to stick to one lender, you should check out and compare the offers by many companies. The finer points to compare are the car loan interest rate, Loan to Value, processing charges, prepayment penalty (if any) etc.
5. Apply for pre-approval
Once you have zeroed in on the bank/lender, go ahead and apply for pre approval. You may need to furnish certain documents depending on the case.
To Sum It All Up
Pre-approval is like the trump card that allows you to shop for your car loan, at the best bargain with maximum flexibility. Armed with this, you can focus on your next step, which is buying the car. You may not always take the loan that has been pre approved, but that is quite okay. The pre approved car loan puts the right perspective in place and arms you with the power to get the best deal for your car and also the actual loan at the best car loan interest rates.