Whether you have a great credit, poor credit or no credit at all, using the pre-approval process will let you know how much you can afford and what types of cars are within your price range. It will help you understand what cars you will also need to stay away from.
It can also be a good indicator on whether not you should by it new or used. If you're in the market for a new or used car, the following tips will help you along with the pre-approval process.
Check your Credit Report
Make sure you know what your credit score and history look like before shopping for a pre-approval offer.
Fixing any negative items will increase your credit score and allow you to take advantage of lower interest rates. Up to 5 percent of consumers in the United States are given higher loan interest rates solely due to errors on their credit reports, so this step is essential before contacting the dealership for pre-approval.
Limit Your Debt
If you are the kind of person that tends to have a lot of debt, it can make the pre-approval process for your auto loan much harder.
Think of it like going to a bank and asking for a loan. Only you already have a lot of debt and your credit is not very good. The bank isn’t just going to give the money you want.
And if they do, you may not qualify for the amount that you had hoped for if at all because you are too much of a risk financially. Therefore if you want to make the process go easier to pre-approve your car loan, then you want to make sure that your debt is very minimal to show that you are not a financial risk.
You want to be able to show that you can afford what you say you can afford and be able to pay your auto bill on time.
Make sure you Meet the Minimum Requirements
While dealerships and banks like Markosian Auto try to work with all potential buyers, you'll need to meet some minimum qualifications for pre-approval:
Some of those qualifications are:
Income - In most cases, and depending on the type of car you're looking for, you'll need at least $1,500 in pre-tax monthly income to qualify.
Down payment - Depending on your credit history, you'll need some type of down payment for the vehicle.
Residency - Proof of residency is also required, which can be in the form of a utility bill or apartment lease.
Debt to Income Ratio - Your deb to income ratio, including the car loan and any monthly credit card payments, should be less than 45 percent of your income.
If all qualifications are met, you'll most likely be pre-approved for a loan in less than 24 hours.
Compare Rates and Begin Shopping
Once a pre-approval comes through, compare it with rates from other lenders to determine which one best suits your personal needs.
Applying at a dealership can make this process much easier because their finance department will send your application to multiple lenders at once and will choose the best option for you.
It's important to remember that your interest rate will be determined by your credit history. The pre-approval process might seem daunting at first, but working with the right people can take alleviate stress and get you driving away in the car of your dreams within 24 hours.
It's important to remember that your interest rate will be determined by your credit history. The pre-approval process might seem daunting at first, but working with the right people can take alleviate stress and get you driving away in the car of your dreams within 24 hours.
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