Getting pre-approved for a car loan lessens the stress of shopping for a car, and it could reduce the amount you end up paying for your vehicle by giving you a more solid position when negotiating with dealers.

What is Auto Loan Pre-Approval?

Auto loan pre-approval is when you go to a lender, such as a credit union, and provide them with enough information to pull your credit report and assess your financial position. 

During the pre-approval process, the lender decides how much you can borrow and what interest rate you’d qualify for. They then give you a certificate indicating that you have been preapproved for a loan with such and such terms.

Advantages of Auto Loan Pre-Approval

Pre-approval is more than a simple prequalification. With prequalification, you get a tentative idea of what you might be able to borrow, and it can be a good way to shop for the best rates and terms. 

However, during pre-approval, your lender will look more closely at your qualifications, which allows them to approve you for a specific loan amount and interest rate. This information is backed by real data about your credit, and that makes a difference when you’re shopping for a car.

Set a clear budget

The solid information you get through pre-approval gives you a concrete budget to work with since you know exactly how much you are allowed to borrow and what rate you qualify for. That information lets you narrow your search to only those vehicles that will match your budget.

It’s best practice to look for cars that are worth less than what you’re pre-approved for. That way, you can account for any fees and taxes that come with the purchase.

Negotiate terms with more weight

Walking into dealerships with an auto loan pre-approval allows you to negotiate pricing and terms with more weight. It shifts the discussion to the price of the car rather than whatever monthly payment the dealer might try to offer you.

Put simply, it gives a clear range with a stable negotiating position. You know exactly what you can afford, and that leaves the dealer less room to try to get you to accept higher prices. Without that, your position is a bit more nebulous.

Potentially better rates

Most dealers offer their own financing, either by themselves or through captive lenders. While that may be convenient for buyers, it typically results in higher rates since they act as a middleman between you and the lender. 

With an auto loan pre-approval, you already have an interest rate in place, and it could well be lower than what the dealer might be willing to offer themselves. The dealer would have to beat your pre-approved rate to provide you with their own financing, which ultimately gives you more bargaining power.

More buying options

One of the great advantages of loan pre-approval is that it gives you options. You’re not stuck with whatever dealer offers the best financing options—you can shop around. The fact that you can go to someone’s competition makes it easier for you to negotiate, so you can focus more on finding the right vehicle at the right price.

Overall less stress

The freedom and negotiating power you get through auto loan pre-approval help eliminate the stress involved in shopping for a vehicle. 

On top of that, you can feel secure in how much you’re able to spend on a car. There’s no worry about whether you’ll be approved for enough to pay for the car you choose—you can instead focus on choosing a car that perfectly matches your budget.

Getting Auto Loan Pre-Approval

Getting preapproved for a car loan involves a few steps. These are detailed below.

Review your credit report

Before going to your lender, you may want to review your credit information yourself first. Doing so gives you a chance to catch any errors, dispute them, and get them resolved in advance. By correcting your credit score to a more favorable number, you’ll stand a better chance of being pre-approved for a lower interest rate.


To get pre-approved for an auto loan from a credit union, you’ll need to get a few documents together. These include:

  • A form of photo ID, such as a driver’s license or state ID
  • Your current employment status
  • Monthly income, which can be found on bank statements or pay stubs
  • Your social security number

Your lender will review this information and do a hard pull on your credit report. With your credit score, credit history, and monthly income, they’ll be able to determine how much you qualify to borrow and what interest rate they can offer you.

Get pre-approved

Assuming everything checks out, you’ll get pre-approved by your lender, allowing you to start shopping for the right vehicle to meet your needs and your budget.

As with many financial institutions, credit unions offer auto loan pre-approval to their members, often with favorable rates and terms. Talking with your credit union about pre-approval can help you begin the search for your dream car.

Get Pre-Approved Online!