Unless you’re lucky enough to have plenty of cash on hand, buying a car usually means applying for an auto loan. This is something you can do right at the dealership, but you’ll do better if you pre-qualify for an auto loan before you even walk through the showroom doors. Here’s how the process works and why it’s worth taking the time to do.
What does it mean to pre-qualify for an auto loan?
The process of getting an auto loan starts by proving to a lender that you’re a good candidate for a loan. When you pre-qualify for an auto loan, the lender looks at basic information on your financial profile and uses that to determine whether to grant you a loan. It’s the first step in the process of securing a loan and driving away in a new car.
Click here to learn about AAA’s auto loan services.
Why pre-qualify for an auto loan before you shop?
You may think your credit history is good enough for a loan. But if lenders see things differently, you may have to scale back on your new car purchase at the last minute. When you pre-qualify for an auto loan it gives you the assurance that you’ll be able to get the loan you need when you find the perfect car. This makes budgeting easier and avoids disappointment.
Pre-qualifying also lets the dealership know you’re serious about buying a car. They want to work with people who are planning on going home with a new car, not with people who can’t get a loan or who have no real intention of buying. Walking in pre-qualified gives you credibility with the dealership, so you can be assured of their attention.
Lastly, you’ll often get a better deal when you pre-qualify for an auto loan on your own rather than working through the dealership. Spending the time to research the terms at various lenders gives you the best chance for getting a lower interest rate, which will save you money over the life of the loan.
How do I pre-qualify for an auto loan?
Getting an auto loan is all about proving that you are a worthy credit risk. A lender won’t give you tens of thousands of dollars for a car if they don’t think you’ll pay back the money. Pre-qualifying lets lenders look at your credit history and determine the terms under which they’ll grant a loan. You can make the process easier by making sure your financial information is accurate.
You’ll also want to do some homework on potential cars in order to determine how much money you need to borrow. There are a host of resources that can help in this process. AAA’s Auto Buying Program, for example, lets you compare vehicles, see what others have paid and get special members pricing on actual dealer inventory.
Check your credit report
You should check your credit report annually, but this is especially important when it comes time to pre-qualify for an auto loan. Your credit report will show any loans you have, from a mortgage to a credit card, and includes information on current balances and your payment histories. It also shows loans you have paid in full. If anything is incorrect, you should get the information corrected before you attempt to pre-qualify. You don’t want incorrect negative information hurting your chances.
If someone is co-signing your auto loan, then be sure they check their credit information as well. You both need accurate credit reports to ensure you get the best terms possible.
Pre-qualify for an auto loan and be one step closer to driving home in the perfect car. Click here to learn about AAA’s auto loan services.