The Pros and Cons of Getting Pre-Approved for an Auto Loan
The world of pre-approved auto loans may seem confusing if you aren’t familiar with how they work. The truth is, they can relieve a lot of the stress involved in purchasing a car. If you’re planning to buy a car and think pre-approved auto financing may be the way to go, evaluate the pros and cons of obtaining approval for a loan before shopping for your vehicle over a conventional auto loan:
Pros of Pre-Approved Auto Loans
- You will know exactly how much you can spend when comparing cars.
- The bargaining power is placed in your hands, rather than the salesperson’s.
- You can shop for an affordable interest rate before securing a loan.
- You will avoid being talked into paying for expensive and unnecessary “loan packages” because your budget is already set.
- The fixed rate will protect you against a more expensive loan if interest rates rise.
Cons of Pre-Approved Auto Loans
- These loans are usually only valid for a limited length of time, such as 30 days from the approval date.
- If you decide you want a more expensive car, you will not be able to purchase it with the loan you have.
- If you need a pre-approved auto loan for bad credit, you will most likely have to secure the loan with collateral that can be seized in the event of nonpayment.
Having pre-approved financing can be a huge help in making your big item purchase, but if you’re not careful, it can also limit your shopping options. If you do choose to use a pre-approved loan, make sure you understand what you can and cannot do within your financing terms of agreement.
If you don’t have a specific time line or price range in mind, you may want to establish a list of criteria for the right vehicle you’re looking for before seeking a pre-approved auto loan.