Many people set their sights on the car that they desire to buy before applying for a car loan. Finding out that a lender won’t let an individual borrow enough for buying a car of their choice can be pretty disappointing. Some individuals try to prevent this from happening by getting a pre-approved car loan. A pre-approved car loan means that the lender signs off on loaning him or her a certain amount of money. Pre-approval does not guarantee that one will get their car loan but it might help narrow one’s search by giving one a ballpark figure that he or she might be able to borrow. An individual will still need to make sure of the fact that their financial circumstances remain the same between the time they get pre-approved for a car loan and when they are fully approved. But before that one should also check the Car Loan Interest Rate offered in the market. Getting a pre-approved car loan involves some of the checks that are to be conducted before a car loan is completely approved. One needs to submit their identity documents, as well as bank documents or pay slips in order to prove that they have the income to repay the loan. Also, the lender might wish to do a credit score check. If the lender is satisfied that the borrower is likely to repay the loan then they will offer a pre-approval, which is a conditional consent to the loan that is usually valid for a few months.
One will feel the need to shortlist a car that is within their timeframe and then apply for the car loan. The lender will further check that the selected car meets their lending criteria, and also confirm that the information provided for their pre-approval has not been changed significantly. For example, if a borrower is buying a used car with a pre-approved loan, then some lenders might insist that it should not be older than seven years. Again if the borrower has lost their job or business income has decreased the lender might require to explain how the individual plans to make up for the lost income before approving their car loan.
Considering that only a few lenders offer a pre-approval for car loans one might not find a suitable lender in order to get a car loan pre-approved. Nevertheless one might want to look at the advantages and disadvantages of a pre-approved car loan. Some of the advantages are listed below:
It can simplify the searching for a car by helping to specify a suitable price range.
It gives one the confidence of knowing that he or she can get a car loan before they begin looking for a car.
It can help an individual negotiate with the car dealers as they do not need to depend on them for financing options.
On the other hand, there are a few disadvantages that are jotted down below:
One can get a pre-approved car loan from a few lenders which mean that one might not have the option of holding out for better loan terms.
Pre-approval involves a credit score check which means that the lenders will be recorded as an inquiry in their credit report.
Pre-approval of car loans does not last very long which means that an individual has to find their dream car faster.
One can apply for a Car Loan pre-approval online but in order to do so, they will have to provide documents and financial information instantly. Before applying for a pre-approval one can use the car loan calculator to calculate the interest rates of the various institutions that are offering pre-approval of a car loan. One might also feel the need to do some homework before getting started on the car loan pre-approval. One can research the type of car they want to buy and estimate its costs and additional expenses, which include stamp duty, insurance, and registration costs. Through this exercise, one will be able to estimate how much one needs to borrow.
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