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Should I Get Pre-Approved for My Auto Loan?

Drowning in credit card debt significantly affects your financial health by negatively impacting your credit score. With a bad credit score, you’ll lose the chance of getting competitive credit card offers and being approved for the best loan rates. But why is it essential to get pre-approved for your auto loan? 

When you buy a car, you want to know that you’re making a sound financial decision. The only way to ensure that is to request a pre-approval letter from your bank or credit union. That way, you know how much your auto loan costs before you walk into the dealership (or dealership website). It gives you enough time to analyze the costs, benefits, and risks before committing to a purchase.  

man surrendering his credit card as he is drowning in credit card debt 

Benefits of Getting Your Loan Pre-Approved

Guarantees That You Have a Loan to Cover the Cost of the Car You Want

Getting pre-approved ensures you will get a car once you go to the dealership. Aside from the time you save from doing this beforehand, you avoid the frustration of getting denied when you are writing up the deal. 

However, you should note that this doesn’t guarantee you get the right car or get accepted into the dealership. You should still shop around, ask questions, and look for reviews before committing. 

However, you will have a much better chance of getting the loan you need. It is also important to note that while you may get pre-approved for your car, it doesn’t mean you are guaranteed to get your financing. Your rate and terms of your loan may be higher than you expected. You may end up choosing a different vehicle than you wanted. 

Proves That You Are Serious About Buying a Car

A pre-approval tells the dealership that you are serious about buying a car and prepared to make the payments on time. It shows them that you are creditworthy, organized, and dependable. 

In turn, they may be more willing to approve your loan request and work with you to get you the financing you need. 

The great thing about getting pre-approved is using this as a bargaining chip to negotiate the best rates or terms. It will be much easier to deal with if you can tell them how much you expect to spend on your car and that you’re prepared to pay for the entire amount. 

Avoids Multiple Inquiries Into Your Credit Score

When you do not get pre-approved for your car loan, you are likely to be asked to verify that your credit score is sufficient for a car loan. This process may be repeated by multiple credit card companies, banks, and even car dealerships. 

While this is time-consuming, credit card holders also reported their credit score dropping due to these multiple inquiries. Getting pre-approved allows you to prevent this from happening and helps you to get the best rates and terms you deserve. 

However, it’s crucial to educate yourself about the recent increase in interest rates as announced by the Federal Reserve, following the rise in the inflation rate. In addition, some credit card companies increased interest rates by 2% following the Federal Reserve’s increase. Therefore, it is essential to know that your credit score is likely affected by such changes.  

man getting financial counseling after drowning in credit card debt

Drowning in Credit Card Debt?

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