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How to get preapproved for an auto loan and gain negotiation power Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial decisions by offering interactive tools and financial calculators as well as publishing original and impartial content, by enabling you to conduct your own research and analyze information for free and help you make informed financial decisions. Bankrate has partnerships with issuers, including but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this website are provided by companies who pay us. This compensation can affect the way and where products appear on this site, including, for example, the order in which they may appear within the listing categories in the event that they are not permitted by law for our mortgage, home equity and other home loan products. However, this compensation will affect the content we publish or the reviews that you see on this site. We do not contain the universe of companies or financial offerings that could be available to you.

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4 minutes read Read Published 7 March 2023.

Written by Rebecca Betterton Written by Auto Loans Reporter

Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers with the ins and outs of securely borrowing money to purchase the car they want.

Editor: Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate since the end of 2021. They are dedicated to helping readers gain confidence to control their finances through providing precise, well-studied information that breaks down otherwise complex subjects into bite-sized pieces.

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Founded in 1976, Bankrate has a proven track experience of helping customers make wise financial decisions.

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who ensure everything we publish will ensure that our content is reliable, honest and trustworthy. Our loans editors and reporters focus on the things that consumers care about the most — the various types of loans available, the best rates, the most reliable lenders, ways to repay debt, and many more. So you’ll be able to feel secure when investing your money.

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In the case of negotiations , you should do all you can to control negotiations. Making an application in the process of applying for an the auto loan preapproval is a way to have an edge in the purchase of a vehicle. Taking this step means that a potential lender has reviewed your credit history, your application as well as the required documentation and is ready to provide you a formal loan offer in a certain amount. This is , though the terms are often used to refer to the same thing. When you’re prequalified for a loan then the lender only does a soft credit check, and the approval won’t be confirmed until you complete the full application. Preapproval for an auto loan is a matter of a little bit of extra time, and it ensures that you’ve got a solid estimate of the amount you’ll need to spend when you go car shopping and also the amount you’ll likely be offered. Step 1. Organize the necessary documents You can get preapproved for an auto loan via banks, online lenders, or credit unions. Whichever option you choose first, you must begin collecting the necessary information for an application. These include: Personal information, like names, Social Security number, driver’s licence, contact details and your home address. Income, including your employer, its contact details and your annual income. The income documentation you may be required to supply could include the W-2, tax return or pay stubs. The amount you wish to finance and the preferred auto loan term. Information about the age as well as the mileage on your vehicle when you purchase a used. Trade-in information when applicable. Bankrate tip

To make the application process easier, gather necessary financial documents in advance and save them in PDF format on your computer.

Step 2. Shop around for loan options Similar to how you shop around for your car, it’s a good idea to . The interest rates you pay for are dependent on your credit score and other variables — all of which can differ from lender to lender. By shopping around, you may get a better deal , as well as more beneficial loan terms. Achieving an interest rate just a tenth of a percentage point less can make a big difference in how much you spend on a loan. To get the best deal apply for multiple lenders. Bankrate’s advice

Take a look at Bankrate’s top picks to kick off your search.

Step 3. Submit the preapproval application In most cases the process of applying for preapproval is similar to an ordinary full loan application. You can apply online, over the telephone or in person. If you choose to submit online, research the most reputable lenders. However you decide to complete your application — online or in person you should expect to take around 15 minutes to complete every application. Certain lenders have an comprehensive preapproval procedure, and some may require a minimum credit score or information regarding the age of your vehicle and mileage. Look for details about application requirements on lender websites before applying. Once you’ve provided the required details, applications are typically processed within 30 minutes. Bankrate tip

When you have your loan has been approved and you are approved, you usually get 30 to 60 days to search for a vehicle before the loan offer expires.

Benefits of benefits of auto loan preapproval. A car loan preapproval comes with many benefits, including putting you in the driver’s seat in negotiating the best deal and getting the most competitive interest rates available. Confidence Dealerships can seem overwhelmingand the buying process can be daunting. Entering this process with a preapproved loan offer in hand gives an additional layer of confidence and ease. With an approved loan you have a clear idea of the loan duration and the interest rate. This information makes it much easier for you to estimate your monthly payments according to the purchase price you negotiate with an agent. Instead of stressing about finding vehicle financing, you can focus on the things that are important to you and your life. Protection from unnecessary add-ons when you are negotiating a deal on an automobile, particularly when you purchase a vehicle that has dealer financing and sales staff, they will often try to maximize the profit they earn. This might include such extras like rustproofing the car or fabric protection as well as extended warranties. When you apply for an approved auto loan, you already have a firm number that you have in mind. This will make it easier to say no to additional costs that aren’t part of your budget for shopping when it’s time to finalize the sale. A better understanding of the expected price The true tends to be more expensive than you expect for those who are buying for the first time. A solid number for what you can borrow will make it easier to budget and help you stay on track when shopping. You should calculate potential auto loans in advance to know what you can afford to borrow. Also, when you are calculating your monthly costs make sure you include the cost of auto insurance. You could also look for insurance quotes for the vehicle you’re thinking of buying to ensure you are aware of what the real, full cost will be. Stronger negotiation power Although dealership financing can be an excellent option for certain drivers, preapproval ensures that you will not be able to take advantage of the financing suggestions of the salesperson. Dealers will also see your dedication to purchasing a car and are likely to be looking to gain your business. They may even be able to offer a more competitive rate from their network of lenders. The next step if you’re planning to go car shopping and are preapproved to get an automobile loan will give you a firm idea of how much you can spend. This puts you in the driver’s seat when it comes time to bargain. Before submitting your application for preapproval, gather the necessary documents. If you are planning to apply online, be sure to look for reliable lenders. The best methods to accomplish this is by reviewing the lender’s Google reviews by past customers, and analyzing their ratings with the Better Business Bureau and Trustpilot.

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Written by Auto Loans Reporter

Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers to navigate the ins and outs of securely borrowing money to purchase the car they want.

The edit was done by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate since the end of 2021. They are committed to helping readers gain confidence to control their finances by providing clear, well-researched information that breaks down complicated topics into bite-sized pieces.

Auto loans editor

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