Get pre-approved for a car loan in 3 steps

When it comes to car financing, you want to do everything you can to master the negotiations. One way to have an advantage when buying a vehicle is to get pre-approved for an auto loan. Getting pre-approved for a car loan only takes a little extra time before buying a car. This ensures that you have a clear idea of ​​what you can spend and the interest rates and terms you are likely to be offered.

What is auto loan pre-approval?

Auto loan pre-approval is the ability to get approved for a loan of a specific amount before buying a car. This means that the potential lender has reviewed your credit history, application and required documents and is ready to make you a formal offer. Simply put, he is approved for a car loan before he has the vehicle to go with him.

Prequalification differs from preapproval, although the terms are sometimes used interchangeably. When you prequalify for a loan, the lender only does a soft credit check and approval is not guaranteed until you submit the complete application. Getting pre-approved for a car loan gives you the added security of having a formal loan offer without the pressure of choosing a vehicle right away.

How to get pre-approved for a car loan

You can get pre-approved for a car loan through online lenders, banks, or credit unions. Although the process varies slightly by lender, the steps are similar.

Step 1. Organize the necessary documents

Gather the following documents before you begin your search.

  • Personal information, such as your name, social security number, driver’s license, contact information, and home address.
  • Income, including your employer, contact details and your annual income.
  • The amount you wish to finance and the preferred auto loan term.
  • Vehicle age and mileage information if buying used.
  • Trade-in information, if applicable.

Step 2. Shop around for loan options

Just like shopping for your vehicle, you need to compare lenders. Your interest rates are determined by your credit history and a combination of other factors, all of which vary to some extent depending on the lender. Check out the Bankrate winners for the best auto loans to start your search.

To get the best rates, complete applications with multiple lenders. Keep in mind that pre-approval requests will temporarily lower your credit score if they require a thorough credit investigation. It is best to submit all requests within two weeks so that they only count as one request.

Step 3. Submit the pre-approval request

Depending on the lender, the application process will be similar to a typical full loan application. It can probably be completed online and will be quite simple.

Some lenders have requirements regarding credit rating or vehicle age and mileage, so research details on lenders’ websites before applying.

Benefits of auto loan pre-approval

Pre-approving an auto loan has many benefits, including putting you in the driver’s seat when it comes to negotiating the best deal and getting the most competitive interest rates available.


Dealerships can feel very overwhelming, and the car buying process itself can be daunting. Going into this process with an offer in hand gives an extra layer of comfort and ease. It also saves you from having to do side calculations to calculate potential monthly payments. Instead of worrying about finding car financing, you can focus on choose the right vehicle for you and your lifestyle.

Protection against unnecessary additions

Often, dealerships will push for their own financing or focus on monthly payments, which can burden buyers with long loan terms and bad interest rates. By coming with a pre-approval, you already know you have a competitive interest rate and a firm figure for what you can afford. It can make it much easier to say no to supplements or additional guarantees offered when it comes time to sign the papers.

Better understand the expected cost

the true cost of vehicle ownership tends be higher than expected for first-time buyers. Having a solid number for what you can borrow will make budgeting easier and keep your expectations grounded when shopping. It is recommended to you calculate various potential car loans in advance to find out how much you can easily borrow.

Strengthened bargaining power

While dealer financing may be a good idea for some drivers, pre-approval means you won’t feel obligated to use dealer-suggested financing options. Dealerships will also see your commitment to purchase a vehicle and will likely be ready to negotiate to get your business. They may even be able to offer a more competitive rate from their network of lenders.

Next steps

While it’s a good idea to wait to apply for pre-approval until you’re serious about buying a vehicle, the offer isn’t set in stone. Most lenders will give you time to decide if the loan is right for you. Use your pre-approval status as leverage in negotiations to get the best deal, and know that you can walk away if your terms aren’t met.

Ruth R. Culp