How Can I Get Pre-Approved for an Auto Loan?
It only takes a few minutes to fill out an online application for pre-approval with your bank or credit union. Initial requests include name, age (must be 18 or over), address, and social security number. Once the application has been submitted, the financial institution will run a full credit check and review existing debt to determine your pre-approval status. You should expect to hear back, in as little as a few hours (Link for Pre-Approval auto application).
Why Get Pre-Approved for an Auto Loan?
Pre-approved car loans are a great way to streamline the buying process. Getting pre-approved saves you time and money, as it provides a clear picture of what you can afford and allows you time to shop around for a better rate.
Difference Between Pre-Approval and Pre-Qualification.
The difference between auto financing pre-approval and pre-qualification is the same as telling somebody "Yes," or "Maybe."
Pre-qualification occurs when financial institutions review your credit information as a “Soft pull”. This qualification does not lower your credit score and is the lender saying that an application would likely be accepted and approved by their institution. The qualification would still require additional financial and personal information to be pre-approved with a locked-in rate.
Pre-approval occurs when a lender has reviewed all necessary information, including a hard credit pull. If the application is approved the financial institution will offer a locked-in rate.
What are lenders looking for?
Financial institutions look at four main categories when deciding to approve or deny auto loans:
1.) Application - Always take your time to fill out your application; double check that the information you provided is accurate and complete, as a careless mistake could prevent you from getting approved for a loan that you would otherwise qualify for.
2.) Credit Score - A low credit score will always hurt your chances of being approved for a loan. In many cases, even if the application gets approved you will pay a higher interest rate. Increasing your credit score can save you thousands of dollars on a single loan. If you need help understanding or improving your credit score, find a financial institution that offers a free credit monitoring app within online banking. The app will show you real-time updates to your credit report and provides helpful tips to continually improve your score.
3.) Credit History – Any applicants with under two years of credit history are largely seen as “just starting on their credit journey.” Applicants with limited credit history may be good borrowers, however many banks and credit unions may not be able to lend to them until they build more credit history. It’s always important to understand how to build your credit, as changing a few simple habits can save you a lot of money.
4.) Debt - lenders must consider your debt-to-income ratio, which is essentially how much you owe per month in bills, divided into your monthly income. Although every institution is different, as general rule a ratio over 50% will likely be denied as high levels of existing debt is a risk to your financial health and the lender.
Becoming pre-approved can simplify the car buying process. If you're looking for the right lender for your financial situation, then please contact our team of experts at Oklahoma Central Credit Union.