It isn’t just possible to get pre-approved for a car loan before going to a dealership, it actually makes a lot of sense to do so. That’s because the last thing you want to do is get your heart set on a car that is way outside your price range. That’s why it’s better to know how much you can get approved for before you head out shopping.
Another reason why it makes sense to get pre-approved is that you’re less likely to get caught up in the excitement of car shopping or the discounts that the salesperson tells you are “today only” and opt for a loan offered by the dealership. If you don’t know what’s a good rate, you could be talked into taking on a loan that is more expensive than you might qualify for elsewhere. For that reason, knowing that you have been pre-approved will give you the power to act quickly if you need to without having to get a dealership loan.
Getting pre-approved is relatively easy. If you’re applying to a lender that has an online pre-approval application, all you have to do is answer a few questions about yourself and your finances. They’ll then give you a quote for how much you’re likely to qualify for. You can also do this with banks or credit unions by going into their branch and filling out an application or filling out their online applications.
One thing to keep in mind, however, is that some lenders will do a hard credit check when they pre-approve you for an auto loan. That could greatly impact your credit score, because it will show up on your credit history as a credit inquiry. Each credit inquiry causes your score to go down a little bit, so you either want to look for lenders who will pre-approve you with a soft credit check that doesn’t affect your credit score or get fewer pre-approvals.
If you do plan to get pre-approved, you should know that sometimes the amount and rate can change once they finalize your loan application. You could end up not being able to borrow as much or having to pay significantly more than you thought in interest. The lender might also decide after conducting a hard credit check or reviewing your application not to lend to you at all.