Why Is It Important to be Pre-Approved Regardless of Credit Score Before Shopping?

Why Is It Important to be Pre-Approved Regardless of Credit Score Before Shopping?

Ah, that new car smell! Buying a car can open a whole world of possibilities, but applying for auto loans makes a lot of us sweat. There’s no need to fear, though, and car shopping with pre-approval for auto loans already set up can make it that much less stressful. 

Why Is Pre-Approval so Important?

There are many benefits to getting pre-approved for a car loan before you start shopping. Here are a few that apply to everyone, regardless of credit score or what kind of car you are looking for:

1. Set a realistic budget
2. Compare interest rates
3. Negotiate more confidently
4. Simplify the buying process
5. Avoid unexpected surprises 

Because there are so many factors that go into a car loan related to each person’s individual financial history, it can be hard for anyone to know what loan amount is going to be approved for you without working with a financial institution. 

The last thing you want to do is pick out your dream car, only to find out that you cannot get a loan to cover the cost. Another benefit to setting your budget before you hit a car lot is that you will not be trying to choose the best car for you at the same time as trying to decide how budgeting for it will work. This is especially important with the possible pressure from a car salesperson added in.

Why Preapproval Is More Important Than Ever With Interest Rates

The interest rate you will be paying on your car loan determines how much money you will ultimately have to pay over the course of your loan, and getting the lowest interest rate possible is everyone’s goal with a loan. When interest rates are going up, it is especially important to seek out the best rates to avoid paying more than you have to.

In general, people with higher credit scores are eligible for lower interest rates, which means they will pay less total over the course of a loan. People with lower credit scores will generally be eligible only for higher interest rates. 

According to NerdWallet, on average in 2022 someone with a credit score of: 

• 781 or above can expect an APR on a new car of 2.4%
• 661-780 can expect an APR on a new car of 3.56%
• 601-660 can expect an APR on a new car of 6.70%
• 501-600 can expect an APR on a new car of 10.87%
• 300-500 can expect an APR on a new car of 14.76%

Among other things, this breakdown shows why it is important to start building your credit score as soon as you can. At Indiana Members Credit Union we are here to help you understand what your current credit score is, how you can improve it, and how you can make it work the best for you.

Why Is It a Good Idea to Get Loan Preapproval from a Lender Before Negotiating with an Auto Dealer?

Bargaining power is a great reason to get preapproved for a car loan before starting to car shop. Knowing what loan amount you have been pre-approved for, and what rate and terms you will likely be eligible for put you in a much stronger bargaining position. Rather than feeling pressured into buying a car for more money than you can comfortably get a loan for, or feeling like you have to take the first offer the dealership gives you, you can shop and bargain confidently.

Why Is It a Good Idea to Get Preapproved for a Loan Before Shopping to Buy a Car For Simplicity?

The last thing you want to do when you’re buying a car is to fill out more paperwork and spend longer at the dealership than necessary. If you are preapproved for your auto loan before you begin, you have fewer steps to take once you have chosen your perfect car. No need to stress or wait around for a lender through the dealership, you know you are ready to drive away stress-free!

Why Will Auto Loan Pre-Approval Save You from Unexpected Surprises?

Before you go into any big financial decision, like buying a car, you want to make sure you have all the best information and can consider your options. Getting pre-approved for an auto loan before you begin shopping means you won’t be surprised by your credit score, what amount you can get a loan for, how much down payment will be required, or any other unexpected surprises that might spring up.

Indiana Members Credit Union: People Helping People

We at IMCU aren’t just a faceless bank, we are a community-led credit union dedicated to being with you through all your life phases. We offer personalized service with all the bells and whistles of a large organization and the most advanced technology, but with a personal touch just for our members. Find a location near you, call, or apply online today to get started with an auto loan pre-approval, or whatever else you need.