When you head to a car dealership, you might simply show up and seek out a loan after negotiating with the car dealership. While this is common way to purchase cars, there are many reasons why this isn't the best approach and why you may be better off getting pre-qualified for a loan.
Getting pre-approved for a loan is more responsible because you will be able to consider how much you can afford and budget more effectively. It's easy to agree to a car you can't afford when you're busy negotiating with a car dealer.
Control the Negotiation Process
When you arrive pre-approved for a loan, you'll be in a better negotiating position. The lender will know that you're able to walk home with the car on that day and will be more eager to sell the car and possibly lower the asking price for the car.
When you turn to a car dealership to find a loan, you have less control over your negotiation. Your credit might be run multiple times to determine which loan would be the best, which could cause a temporary hit on your credit score.
A pre-approved car loan allows you to arrive at the car dealership either with a letter promising a specific loan amount or with a check or coupon so you may pay for the car as if it were cash. This allows you to save time and you don't have to worry about returning without a car if a car loan at the dealership doesn't fall through. Usually, you are free to take your pre-approval anywhere you are shopping.
Choose Your Lender
The best way to get started is to visit the bank you work with, since they will be more inclined to give you a better loan. However, you may turn to other banks or credit unions as an alternative if you're not happy with the rates your bank is providing you with.
Get a Better Deal
By shopping around for a car loan before you head to the dealer, you'll be able to find the best interest rate. You won't be able to research of an interest rate offered to you is the best when you're relying on a lender that the car dealer finds for you. You may also face a dealer mark-up that doesn't occur when you seek a loan from a third-party, so there's no reason not to give it a shot.
For more information, reach out to a local auto loan lender.