All Things You Need to Know about Auto Loan Pre Approval

Auto Loan Pre Approval

MLMFB.COM - Have you ever heard the term of auto loan pre approval? In fact, this term is quite familiar for anyone who ever finance a used or new car. Pre-approval is considered an important step for loan process. Before approving a loan, the lender needs specific information about you.

Once you submit the information, they will conduct pre-approval process which commonly takes 24 hours or less depending on some factors. This approval is valid for 60 days. If you are new in auto loan and wish to know more about pre approval, find the information below.


Auto Loan Pre Approval Process and Eligibility

When you are ready for an auto loan, you will need to follow the process. Before submitting a loan application, you need to consider where you are going to buy the car and it will relate to who will pre-approve the loan. Take for example you submit a loan application to a dealership. The finance department will process your application followed by processing the pre-approval. When everything is done, you are allowed to buy the car but only in that dealership.

In case you do not want to limit yourself, submit the loan application to bank or credit union. Auto loan pre approval from bank or credit union can be used in any dealerships, giving you unlimited choices of car to purchase. When submitting loan application to financial institutions, they will review your application and determine whether or not you are eligible for the loan. The lender will also decide how much you are able to afford for the car and decide the interest rate as well.

There are some benefits when using financial institutions such as credit union or bank to pre-approve your loan. Not only allowing you to purchase the car from any dealerships, the institutions typically charge fewer interest compared to the dealership itself. It is because the bank rates are commonly lower. It is not a surprise to know auto loan pre approval from those institutions is more preferred.
What are the factors commonly considered by lender to approve a loan? When lenders accept loan application, they will review and decide whether the applicants are eligible or not. Things that come to their considerations include:

1.     Credit history

The first factor commonly considered when determining your eligibility for auto loan pre approval is credit history. If you have good credit score, the institution will approve your loan without too many considerations. The lenders will also take your credit history into account. The more problems you have from previous credits, the smaller your chance to get the loan. In other words, the lender needs to find out your payment habits. In case you have late payment frequently, the chance is they will deny your application.


Auto Loan Pre Approval Process


2.    Income

The finance institutions will also take your income into considerations. Before giving auto loan pre approval, bank and credit union will verify your income. It relates to your annual salary or gross monthly. You also need to provide the proof of income because the lenders typically ask for it. Whether you are a self-employed, you might need to include two years of tax returns or recent paycheck. Other documents that will be needed include retirement income, alimony, child support, and disability income.

When purchasing an auto loan, the chance is it compares interest rates and contacts multiple lenders. You are allowed to get multiple pre-approvals without lower down your credit score. Unlike multiple credit applications which may hurt your credit score, this loan system does not work the same. The applications for auto loan pre approval which occur within 30 days will be counted as one inquiry.

In a nut shell, pre-approval is essential when you are shopping an auto loan. To get wide-array of options, it is recommended to apply loan in bank, credit union, or other financial institutions. Unlike applying loan in dealership that allows you to buy car only in specific dealer, the first option enables you to purchase the car from any dealerships.

It is also important to know what the dealer considers when deciding whether one is eligible for the loan or not. Since income and credit score take part in your eligibility, you need to pay attention to both of them for successful auto loan pre approval.

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