Preapproved Car Loans Make the Process Easier — Here’s How To Get One

Smiling couple looking for a new car to buy at car showroom.
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Getting a car loan can often be a lengthy process, filled with hours of research, paperwork and potential disappointment. However, opting for preapproval can significantly simplify this journey. Keep reading if you want to learn how to obtain preapproval for a car loan.

What Is a Preapproved Car Loan?

A preapproved car loan is a promise from a lender to give you money for buying a car, even before you choose which car you want. It’s like having a special budget just for your new ride. With this promise in hand, you can shop with confidence and might even get better deals from sellers.

Why Is Buying a Car Easier With Preapproval?

Imagine having a special pass that helps you buy a car without the usual fuss — that’s what a preapproved car loan does. It tells you how much you can spend, makes sellers take you seriously and lets you get your car faster. Here’s why it’s a game-changer:

  1. Peace of mind: Knowing you’re already approved for a certain amount lets you shop with confidence, alleviating the stress of whether you can afford a particular car.
  2. Negotiating power: Dealers are more likely to negotiate with you if they know you’re a serious buyer with guaranteed financing.
  3. Time-saving: Skip the lengthy paperwork and waiting period at the dealership. Get straight to the point and drive your dream car home faster.
  4. Budget planning: With preapproval, you’ll know exactly how much you can spend, helping you stick to your budget and avoid overspending.

Does Preapproval Guarantee You for a Car Loan?

No, preapproval does not guarantee a car loan. Instead, it indicates that the lender is willing to offer you a loan up to a certain amount based on the information you’ve provided.

The final approval often comes after you’ve selected a car and the lender verifies all the details, including the car’s value, your current financial situation and any changes to your credit report.

Getting Preapproval for a Car Loan: Step-by-Step Guide

Obtaining a car loan can seem daunting, but with the right roadmap, the process is straightforward. Here are the six steps you can follow to obtain a preapproved car loan:

  1. Review your credit score
  2. Determine your budget
  3. Research potential lenders
  4. Gather necessary documentation
  5. Apply for preapproval
  6. Shop with confidence
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1. Review Your Credit Score

Before seeking preapproval, check your credit report for any discrepancies or outstanding debts. A higher credit score will often lead to better loan terms and interest rates. Websites like Credit Karma or Experian can provide you with a free annual credit report.

2. Determine Your Budget

Decide on a realistic budget for your car purchase. Remember to factor in additional costs such as taxes, registration, insurance and potential maintenance. Your preapproval amount should align with this budget.

3. Research Potential Lenders

While many think of banks first, credit unions and online lenders also offer competitive rates. Some may specialize in preapproval for car loans, making them an excellent choice. Look for institutions that have favorable reviews, low interest rates and flexible terms.

4. Gather Necessary Documentation

Most lenders will require the following:

  • Proof of income
  • Employment verification
  • Details of your debts and monthly expenses

Having these documents ready in advance will streamline the preapproval process.

5. Apply for Preapproval

Once you’ve chosen a lender, complete their preapproval application. This will typically involve a soft credit pull which won’t affect your credit score. If approved, the lender will give you a letter or certificate indicating your preapproved loan amount and terms.

6. Shop With Confidence

With your preapproval letter in hand, you can now approach car dealerships as a bona fide buyer. This status not only gives you a psychological edge but also lets dealers know you’re serious, potentially leading to better deals or incentives.

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Do Car Loan Preapprovals Affect Credit Score?

It depends on the type of credit inquiry the lender uses. There are two types:

  1. Soft inquiry: This does not impact your credit score and is usually used for initial preapprovals.
  2. Hard inquiry: This type can affect your credit score and is typically used when you finalize the car loan application.

It’s important to ask the lender what type of inquiry they’ll use before proceeding.

Final Take

Opting for preapproval for a car loan can significantly ease the car-buying process, saving you time and potential heartache. By following these steps and understanding the benefits that come with preapproved car loans, you can position yourself for a smoother, more transparent and empowered car shopping experience.


Here are the answers to some of the most frequently asked questions regarding preapproved car loans.
  • What is the preapproval process for a car?
    • The preapproval process for a car involves the following steps:
      • Review your credit: Check your credit report for accuracy and know your credit score.
      • Determine a budget: Identify how much you want to borrow based on what you can afford.
      • Research lenders: Look into different financial institutions, including banks, credit unions and online lenders.
      • Gather documentation: Prepare necessary documents like proof of income, employment verification and details of any debts.
      • Submit application: Apply for preapproval, which usually involves a soft credit pull.
      • Receive preapproval letter: If approved, you'll receive a letter indicating the loan amount you qualify for.
  • How to get preapproved for a car loan without affecting credit?
    • To get preapproved for a car loan without affecting your credit, check if the lender does a soft credit pull or inquiry. This type of inquiry won't impact your credit score. Always clarify with the lender before proceeding with the application, asking specifically about the type of credit check they'll conduct.
  • What's the difference between auto loan preapproval and prequalification?
    • Both preapproval and prequalification give you an idea of how much you can borrow and at what terms, but there are key differences:
      • Prequalification:
        • Often based on a basic review of your finances and creditworthiness.
        • Does not involve a detailed or hard credit check.
        • Provides a general estimate of the loan amount and terms you might qualify for.
      • Preapproval:
        • Involves a more thorough review of your finances, including possibly a detailed credit check.
        • Provides a more concrete offer of the loan amount, interest rate and terms.
        • Is closer to a loan commitment, though it's still not a guaranteed loan offer.
    • In essence, prequalification is a preliminary step that can give you a ballpark idea of what you might qualify for, while preapproval provides a more solidified offer based on a deeper examination of your financial standing.
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Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.


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