Is it Better to Pre Qualify for an Auto Loan?


Pre-qualifying, or acquiring a pre-approval, for an auto loan before you shop has its benefits. You’ll know your interest rate ahead of time, allowing you to budget accordingly.

You can also save time while shopping; some banks can take as long as a week to provide an approval.


Is it Better to Pre Qualify for an Auto Loan?

Pre Qualify for an Auto Loan

Saving Time

Without a pre-approval, you might shop until you found a car you wanted and then apply for your loan. Because bank approval times are not usually immediate, you might lose your car deal to another ready and more prepared buyer.

If you obtain a pre-approval, you’ll know your lending limits, interest rate and term. You can promptly finish the loan process by providing the bank the car’s information to receive your loan check quickly.



While you can wait as long as a week to obtain a pre-approval, dealerships can send in a loan application electronically. The response from the bank is quick, usually within an hour. Without a pre-approval in hand, you may find yourself in the spur of the moment making a quick decision at a dealer.

Dealers can increase your approved interest rate to make a profit. If you already know your rate, the dealer is likely to try and beat it, not increase it. When using a dealer, your pre-approval acts as financial protection.


Manufacturer Offers

If you’re buying a new car, check the dealership or manufacturer’s website for special offers before applying on your own. You may find the vehicle you want has an offer as low as 0 percent. When the manufacturer offers a rate to entice borrowers, it is often lower than you can obtain through any other lender.

Call local banks or visit websites to gauge common rates. If the manufacturer’s incentive is the best you find, apply at the dealership to get the rate, in which case a pre-approval is unnecessary.



Obtaining a pre-approval allows you to set your budget and shop within your means to find the car you want. Because you’ll already know your interest rate, term and monthly payment, you can avoid looking at cars that are too expensive.

Your bank’s loan representative will go over your pre-approval terms in full, meaning you’ll know how much you’ll pay every month and the total amount paid back over time. Dealers don’t always extend the same courtesy, as many try to focus buyers on monthly payment, not interest rate or other loan information important to your finances or budget.


Car Loan After a Total Loss

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