Most Americans buy a new car between six to eight years after they’ve bought their last one. If you’re getting to the end of your old car’s life, you may have already started car shopping! If you are, you should look into pre-qualification for an auto loan. But how do you do that, and what are the benefits? Keep reading to find out!
Decide on a Realistic Budget
First, make sure that you decide on a budget that is realistic. You’ll have to take into account the interest rate on your loan as well, so you should keep that in mind.
However, getting pre-qualification for a loan can even help you save some money.
In general, you should purchase a car for less than what you’re approved for. You’ll have to save at least 10% for the taxes and fees on your loan. You’ll also have to consider the insurance and gas and maintenance fees for the new car.
You’ll also have to decide how much you want to put on a down payment or if you’re trading any vehicles in that could help you save some money.
After you’ve gathered all that information, you can find an online calculator to help you figure out how much your monthly payment would be. If it’s something you can afford that won’t break your budget, you should be okay.
If it will hurt you each month, try shopping around for a cheaper car.
Check Your Credit
After you’ve set your budget, check your credit score. You should check it between three to six months before you buy any big purchase.
You can check your credit report for free through different companies, but this will give you a good idea of whether you need to raise your score or if you are already ready to apply for a loan.
When you understand your credit profile, you’ll be able to look at different lenders to get the best rate.
Shop for Different Lenders
If you have a good credit score, you’ll need to start looking for different lenders. They’ll be able to give you the pre-qualification status that can help you find an actual loan.
Pre-qualification and pre-approval are normally meant for people who have good credit, so if you have a low score, you may not be able to qualify.
However, you could always try applying with a credit union as well. If you’re a member of that union, you may even be able to access savings and discounts.
Regardless of where you shop for pre-qualification, you should try and find a place that will also work to give you the loan afterward. This way you can work with the same agent and not have to try and find another one.
Negotiate at Dealership
Once you do get pre-qualification and pre-approved, you can shop at the dealership as if you were paying with cash. This means that you can negotiate much better with places like http://gatesauto.com/.
If you don’t have that pre-approval, you’ll likely have to get a loan at the dealership, which can cost you more and gives all the power to the salesman.
But with a loan already in hand, the salesman will ask you what kind of monthly payment you’re looking for. Inform them that you’re more concerned about the price of the car since you already know what your monthly bill will be.
Benefits of Getting Pre-Qualification
There are many benefits to getting pre-qualified for an auto loan. You’ll be able to know right away if your credit is good enough for a car loan.
With that, you’ll be able to avoid going to pick up a new car but then got denied because your credit score is too low.
You’ll also be able to manage your budget before you go shopping. This way, you set your expectations reasonably and avoid falling in love with a really expensive car.
When you have a more realistic idea of what you can borrow and pay each month, you won’t even want to look at the other cars.
You’ll also be able to set your own financing rather than dealing with the dealership’s financial office. While these deals may sound great, you’ll likely pay more money than getting a deal directly from financial institutions.
Plus, if you’re pre-qualified, the dealership will contact the lender to make the arrangements on your behalf, which makes it easier on you.
When you decide on a car and work with the dealership to sign the papers, they’ll also try and give you extended warranties and add-ons. However, if they already know what your loan is worth and know that you can’t afford it, they will skip that and help you sign the papers faster.
If you struggle with saying no and find yourself easily peer pressured, you can now just say that you already have a pre-qualified amount and you’re not able to go over that.
Learn More About How an Auto Loan Pre-Qualification Works
These are only a few things about an auto loan pre-qualification that you should know, but there are many more things you should keep in mind!
We know that buying a car can be stressful, but you don’t have to do it on your own. We’re here to help you out!
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