When you go looking for auto loan pre-approval, you are looking for a blank check auto loan. This type of loan is so named because you can use it at the dealership of your choice just like a blank check. This type of loan has become quite popular because many dealers like to mark up interest rates, a procedure known as “dealer reserve.” This “reserve” is worked into the price of the car. Quite often, a dealer will take advantage of a shopper with a low credit score. You can avoid “dealer reserve” and being taken advantage of by being pre-approved for a blank check loan. For this reason, it should be one of your auto loan options. Many car loan lenders do not offer this type of loan, so you will need to shop around.
Know your credit score and history. More than any other consideration, this is the most important thing when getting a car loan. Knowing what your credit looks like and what it should look like is going to help you negotiate for the best terms on your pre-approved auto loan.
Knowing how much you want to spend overall is a key factor in obtaining a blank check auto loan. Knowing how much you have to spend makes shopping for the ideal car much easier. If you see the car you like on a dealer’s lot and he is asking for more than you care to spend, having that pre-approval could be the magic key that gets you the price you want. Many dealers will look more favorably on a buyer that has a pre-approval than one that doesn’t. A blank check loan guarantees them they will be paid immediately. The sometimes long and drawn out process of checking the banks for approval is skipped. All he has to do is write up the sale, shake your hand and watch you drive away.
If you’ve got great or even good credit, you may have received fliers in the mail offering you pre-approved loans. Make sure you don’t over-extend yourself. If you can easily afford $400 a month, but are looking at loans with payments of $500 and more, you may be approved, but you may get hit with a higher rate because the lender may feel you might have problems later on. If you can, offer a larger downpayment. This reduces the risk to the bank and your payoff is a lower rate. Make sure you make note of this intention in the “comments” or “remarks” section of the application. Unless you are applying online, inform the person you are applying with, also.
Once you know how much you can or want to spend total and monthly, and have your rate locked in, all that left before the bank gives you the check is to sign the papers. Then you wait for a short time, take your check, shake the hand of your loan officer and go buy your new car.
Knowing how much money you can spend and what your payments are before you set foot on a dealership lot can be a very rewarding feeling. It gives you freedom to actually enjoy the car buying process, instead of worrying about whether you can afford the car or not and what sort of loan terms you’re going to get for the car you want.