How To Get Preapproved For Your Auto Loan

Before you ever go to look at any cars, you may want to get a preapproved auto loan. This is an excellent way to save some money when you go to get your next car - or even your first one. Here are some tips that will show you how to get a preapproved auto loan and some great savings.
The first thing that you want to do is to get a current copy of your credit report and look it over. Mistakes can be made on some of the information reported on it and you want to eliminate them before you apply. Take time to examine it carefully and take the necessary steps to have mistakes corrected properly. Remember that the lender will base the interest rate on your loan from the credit bureaus. Incorrect information could prevent you from even getting a loan, or could place you into a higher interest rate for your loan. Having too much debt in relation to your income could also place you into higher interest rates, too.
The next thing would be to shop around for your preapproved auto loan. This means getting quotes from a few lenders and choosing the one that is the best. To do this online, you will need to go to a broker's Web site - one where you will get back quotes from several lenders with one application. It won't take long to get back your quotes.
Once you accept a lender's quote, a blank check will then be sent to you. A credit limit will also be set, and you can write the check to the car dealer for the amount of the car. This check is good for a limited time - some may be good for two months. Even though you receive the check, there is no actual loan being given - until you use it.
Knowing just how much you have to be able to spend before you start looking for that car enables you to stay within your budget better. You will also know all the details about your loan that a car dealer may be less reluctant to share with you if you get financing through them.
Taking this preapproved auto loan check to the dealer will quickly give you an edge in your negotiations with them. Since there will be no question as to your real interest in buying a car, you can get better prices because they like money right away. They also know that you are serious about buying a car, too.
In order to use that preapproved auto loan check in the best way possible, though, you should not buy immediately. Once you find a car or two that you are interested in, take a little time to go online and find out both the value of the car, and how much you can get one for in your area. Someone may be selling it for less than the dealer. Having this knowledge will enable you to go back to the dealer, show him the better offer, and watch them bring their price down to match it, or make it even lower.
Don’t forget that you can sweeten your deal more by putting some money down or by trading in your old vehicle. Learn about how to make good deals with car dealers beforehand and you can be sure to drive away with one of those great deals – all with a preapproved auto loan.

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Personal loan fact sheet

Types of loans


There are two main types of personal loans: secured and unsecured. Unsecured loans are not tied to any of your assets, but secured loans are - usually to your property, which is why they are often called homeowner loans. If you default on a secured loan, your lender can force you to sell the asset to pay off your debt. Car loans are also secured loans, with the lender using the vehicle you are buying as security for the loan.


Homeowner loans are tied to a property. Photograph: Frank Baron Most lenders offer unsecured loans of between £5,000 and £25,000, although some cap borrowing at £15,000. Smaller loans are available if you shop around, but if your borrowing requirement runs into hundreds of pounds rather than thousands there may be better ways to borrow the money.


If you want to borrow more than £25,000, you will need a secured loan. You will also need enough equity in your property to secure the loan.


Interest rates


The APR (annual percentage rate) on a loan is the amount you will pay in interest each year. Most adverts for loans tend to quote a “typical APR”; you will not necessarily get the same rate of interest when you apply.


Unless you choose a lender with a “one-size-fits-all” interest rate, factors including how much you want to borrow, how long you want to borrow it for and your personal and financial circumstances will all have an influence on how much you pay.


A bank has to have offered its typical APR (or a better rate) to at least 66% of potential customers.


Interest rates can be fixed or variable, and it is important to know which you are signing up for. A fixed rate will remain the same for the term of the loan, which means your monthly repayments will remain the same.


A variable rate will be subject to change, usually in line with the Bank of England base rate. While this is good news when rates are falling, it can be worrying if rates go up and you need to find more money than expected to make your repayments.


Repaying your loan


Most loans are repaid in monthly instalments & usually by direct debit - over a period agreed before you get the money. The lender will tell you how much you need to pay each month when it agrees the loan.


The repayment period is usually fixed and you will have to pay a redemption penalty - for example, two months’ interest - if you want to pay it off sooner. The longer the repayment period, the more interest you will be paying, so go for the shortest you can manage.


Flexible loans, which let you borrow and pay back at will, are becoming more common, but the interest rate charged is often significantly higher.


If you miss a payment the lender will record the default on your credit file. Any new lender may not be put off by one or two missed payments, but if you have missed several you may struggle to get credit elsewhere.


Where to get a loan


The list of organisations offering loans is long and ranges from high street banks, to those that operate only on the internet or telephone, to building societies, credit unions, specialist loan companies and even doorstep lenders.


Typically, cheaper deals are offered by the specialists and internet banks than are available on the high street, but this is not always the case so you should shop around, either online or by contacting lenders to get quotes.


Some Doorstep loans have interest rates as high as 900%. Photograph: Garry Weaser Possibly the most expensive form of credit is offered by doorstep lenders. Unlike mainstream lenders, they will often offer sums of less than £50 - typically used to cover unexpected purchases - and collect payments weekly. However, APRs can be as high as 900% so borrowers who have a choice will tend to avoid them.


Credit unions are an alternative to mainstream lenders and can be an attractive option for some borrowers because they cannot charge more than 2% a month on the reducing balance of the loan (an APR of 26.8%), and most charge just 1% a month (12.7% APR).


Most credit unions offer unsecured loans for up to five years and secured loans for up to 10 years.


Getting into difficulty


Sometimes things go wrong and it is difficult to meet your monthly repayments. If this happens to you, do not ignore letters arriving through your front door.


The best course of action is to get in touch with your lender immediately. Banks and building societies are often willing to help and might offer to freeze the loan temporarily or extend the repayment period.


Their ultimate aim is to recoup their money, but it is usually more advantageous, including cheaper, for them to reschedule your repayments than to take action against you.


It is particularly important to be upfront with your lender if you have a loan secured on your house or another asset, because if things go wrong you may have to sell up to pay back the loan.

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Bad Credit - Some Solutions

So, you’ve established the reasons for your poor credit rating. Now how can you go about fixing the problem?


Correcting Any Mistakes


If you disagree with the facts that the credit reference agency has on your file, you can dispute them. If the information is inaccurate, your record can be amended. The agency can’t change things just because you aren’t happy about it.


Re-applying


Be wary of making too many applications if you’ve been recently turned down for credit – every refusal will show on your record and count as another black mark against you. A better approach is to re-assess your finances, make a plan to tackle your debts, and apply again in a few months time.


Credit Repair Companies


There are companies who claim to be able to remove information from your credit file. Other than correcting inaccurate information, which you can do yourself, this not possible.


Debt Solutions


There are plenty of organisations to help you get a handle on your finances and manage debts. If the problem is out of hand, borrowing more money is not likely to be the best solution. You need to take advice from an independent, trustworthy source, such as a Citizen’s Advice Bureau or the National Debtline (www.nationaldebtline.co.uk). (The Debtline has separate pages for England & Wales and Scotland, as the law differs between the countries.) They provide a helpline, as well as fact sheets on how to deal with debt problems.


Often the first solution to managing your debt is to make a budget, listing all your debts and debtors. You should prioritise, and aim to pay off either the most important debts, like rent or bills, or the ones with the highest interest rates, such as credit cards with high APRs. If there are debts that you can’t afford to pay right now, you should contact your creditors and explain the situation. If you offer to make small, regular payments over a period of time they might be willing to be more flexible.


If you have a number of debts on which the interest is high, it might be a good idea to consolidate these. Arrange an appointment with your bank manager and discuss converting credit cards and overdrafts into a loan. You may get a lower interest rate, and it will simplify your monthly repayments while reducing the overall amount you owe with every instalment.

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