Understanding Auto Loan Pre-Approval, Approval and Co-Signing
The process of getting an auto loan is not especially difficult, particularly at United Teletech Financial, where we try to make things easy for our members. While the process is relatively simple, there are still a few terms you’ll want to learn at the beginning so you can have a good conversation with your UTF team member.
What Does It Mean to Be Pre-approved for an Auto Loan?
When you get pre-approved for a car loan, it means the lender gives you a written estimate of the amount of money and the interest rate you could receive if you find a car you like and decide to buy it.
Why Would I Want to Get Pre-approved for a Car Loan?
Getting pre-approved offers several advantages. First of all, you will find out how much the lender is willing to lend you. This gives you a clear idea of what your budget is, which helps you narrow your search to cars that are in your price range.
Additionally, being pre-approved by a credit union means you don’t have to rely on dealer financing. This type of financing is usually more expensive than credit union financing. For example, dealer financing usually has a higher interest rate.
How Do I Get Pre-Approved for a Car Loan?
Auto loan pre-approval is easy. You visit your nearest UTF branch and sit down with a representative. We’ll take a look at your credit score and history. We’ll also want you to bring a few items to help us evaluate your financial situation.
It’s very helpful if you can provide us with information about your gross income, how much you pay in housing costs, the income you receive from disability or retirement funds, and how much you pay or receive in child support and alimony. This information helps us determine the auto loan amount you might qualify for.
How Is Pre-approval Different From Approval?
Pre-approval gives you proof of your buying power. It allows you to shop for cars with confidence that you’ll be able to pay for a vehicle that falls under your pre-approved amount.
Approval is the formal step. Once you find the car you really want, that’s when you’ll contact us, tell us the details about the car such as the VIN. Once we verify everything on our end, then we can extend the actual loan at an exact amount needed to pay for the car.
The key thing to know is that being pre-approved is not the same as actually being approved. Only when we approve the loan will the money be transferred into your account. After you get pre-approved it is possible that you could do things that prevent us from ultimately approving you for a loan.
For example, if you get pre-approved for an auto loan on Wednesday but then go and get a loan for a boat on Thursday, your situation has changed; you have more debt than you did when we pre-approved you. That means you might not be able to afford to repay the amount you were pre-approved for, so your loan would be at risk of not getting fully approved.
When Do I Need a Cosigner for a Car Loan?
A cosigner is someone who agrees to share responsibility for paying back your auto loan if you don’t. The cosigner has better credit than the applicant, which reduces the risk in the eyes of the lender.
You might want to ask someone to be a cosigner if you have a limited credit history or a low credit score that might prevent you from qualifying. Our UTF team can help you understand if you need a cosigner and what the benefits and drawbacks are.
Ready to Get Behind the Wheel of an Auto Loan?
United Teletech Financial offers auto loans at competitive rates, and you don’t need perfect credit to qualify.