If you’re in the market to buy a car, you don’t want to go through all of the work of finding the right vehicle only to find out you can’t get financing for it—or worse, that you can, but you can’t afford the monthly payments after you bring it home.
If you take the time to get pre-approved first, you can solve both of these issues and more. We’ll show you how to get pre-approved for a car loan in just a short amount of time.
A car loan pre-approval means that you’ve submitted a preliminary application with the lender and received conditional approval on an auto loan. The lender will do a hard credit check and review your financial documents and information during this process, and if approved, you’ll be issued an offer letter; you can then choose whether or not to proceed with a full application. Pre-approval is not a guarantee of approval, but it means you have a good chance.
How to Get Pre-Approved for a Car Loan
As long as you take a few minutes to get things in order, it’s actually very easy to apply for pre-approval on a car loan. Here are the steps you’ll need to take.
1. Gather Information and Documents
Most lenders require the same information. Rather than finding this piecemeal as you go, take a few minutes to gather these details. Write down key bits of information, and round up any documents into one ready-to-go file that you can send to the lender.
You’ll generally need the following details:
Date of birth
Social Security number
Recent addresses and length of residency
Total amount of monthly or annual income, plus any additional income sources
In addition, you’ll need the most recent copies of the following documents:
Driver’s license or other official photo ID
2. Collect Pre-Approval Offers
You wouldn’t pick the first car you see while you’re out shopping, and the same goes for your auto loan too. That’s why you should shop around for the best loan, and to do that, you’ll need to apply for pre-approval with several lenders. The more lenders you get pre-approved with, the better your chances of getting the best possible loan.
Since pre-approvals can trigger hard credit inquiries that damage your credit score, make sure to get all of your rate shopping done within a short period. All auto loan hard inquiries within a period of 14 or 45 days, depending on the model used, will only count as one inquiry. So, check your offers quickly to preserve your credit score as much as possible.
We recommend setting aside a bit of time to do this. It only takes about a few minutes to apply for pre-approval with each lender, which you can usually do online. To keep all of your offers straight, take notes on the following details from each lender’s offer letter:
Loan expiration date
Maximum pre-approval amount
Any limitations such as mileage or age restrictions, or requirements to buy from certain dealerships
3. Go Car Shopping
Once you have a few offers to choose from, pick the one with the best rates. You can use this as a literal bargaining chip if you print it out and bring it with you to shop for cars at a dealership. When you find your car, show the offer letter to the car salesperson and ask if they can offer you a better deal on car financing or even the purchase price of the car itself.
Make sure to find the car you want to buy before your pre-approval offer expires, typically within 30 to 60 days. Otherwise, you’ll have to apply for pre-approval all over again and the rates may have changed.