Buying a car is a big deal! You’ll probably feel nervous when you show up at the dealership or start searching online. Trying to find the right vehicle to fit your lifestyle and budget is stressful enough without worrying about financing too.
When you arrive at the lot, you should be able to focus purely on the cars – not your financing. That’s why it’s a good idea to get your car loan pre-approved before you start shopping, so you already know you’ve got great, low-interest financing ready to go. Read on to learn all the hows and whys of the pre-approval process.
How to Get Pre-Approved for a Car Loan
Follow these simple steps to get pre-approval for your car loan:
Make a Budget
Check Out Inventory
Make sure there are vehicles for sale within your budget. If not, you might have to change your ideal checklist or wait until you have more income.
Look for a Lender Before You Head To The Dealer
Start by checking rates with your local credit union where you can usually secure low interest rates and a term (length you have to pay off your loan) that suits you.
Gather the Paperwork
Getting a pre-approval is relatively easy, but there are several items you will need during the pre-approval process. You will need to provide proof of:
- Your identity
- Your income
- Your residence
- Your credit and banking history (your lender may also run a hard credit check)
In addition, you may need to provide information about:
- The type of vehicle you wish to buy
- Current or planned car insurance
- How you plan to make your down payment
It’s finally time to apply online or in-person at your nearest branch. Depending on which financial institution you choose, your loan should be approved within a few business days. In some cases it may even be approved immediately.
Credit Score and Pre-Approval
If you have a great credit score, you should have no problems getting pre-approved for your auto loan with a credit union. Generally speaking, the better your credit score, the lower your interest rates. If you have poor credit or little financial history, you may run into difficulties, but this doesn’t mean you will automatically get denied.
If you are concerned about your credit, or just starting out with your first loan, don’t hesitate to get in touch with a representative at your local credit union. Often we can help you find the right type of financing for your situation, or provide guidance on how to improve your score, and your chances of pre-approval, over time.
How Can I Improve My Credit Score?
There are a few simple ways to improve your credit:
- Get a low-rate credit card and pay it off each month — on time.
- If you don’t pay your credit card off in full, make sure you use less than 30% of your limit to maintain a good debt-to-credit ratio.
- Get a secured loan (where you borrow against your savings or certificate of deposit) and make punctual monthly payments until it’s all paid off. The on-time payments are reported to credit bureaus and will help increase your score.
Why You Should Get Pre-Approved for a Car Loan
Now that you know how to get pre-approved for a car loan, it’s time to talk about why. Getting an auto loan pre-approval is the same as showing up at the car lot with cash in your pocket.
You can spend all your energy on looking at cars and less on wrangling over financing.
Benefits of getting pre-approved include:
- You’ll already know how much your monthly payment will be.
- You’ll know your vehicle budget in advance so you won’t waste time looking at cars that are too expensive (or too cheap!) for you.
- You won’t need to worry about the dealer massaging the figures to match what you say you can afford on the day.
- The dealer will know you’re a serious buyer and will turn all their attention to finding you a great car.
- You’ll feel confident knowing that you’ve already locked in a great interest rate and term.
Get Pre-Approved for a Car Loan With TEG Federal Credit Union
So what are you waiting for? Start shopping around and get pre-approved for an auto loan from your favorite credit union today. Click below to find out more.