How does auto loan pre-approval work?

Pre-approval is when the lender evaluates your financial need and is then able to advise you on the correct amount to borrow, give interest rates and help you make the smartest financial decisions.

Auto Loan Pre-Approval vs. Pre-Qualification

Pre-approval and pre-qualification sound very similar, but mean different things for auto loans.

Pre qualification is a rough estimate of what you might qualify for based on basic information you provide. Pre-approval is the more official detailed review by a lender of some loans you’d qualify for.

Why get pre-approval for a car?

Helps Set Your Budget

Pre-approval for an auto loan gives you an idea of the budget to work with, and estimated monthly payments.

Broadens Your Search

With pre-approval, you can confidently expand your search beyond dealerships and their financing options. Knowing you can use the loan to pay the seller immediately can allow you to consider private purchases, independent dealers and online listings.

Allows You To Negotiate More

Also with pre-approval, dealers are more likely to take you seriously as the buyer. And with the clear approval and budget in mind, you can negotiate on the price of the vehicle, not just monthly payments.

What a Pre-Approval Does (and Doesn’t) Guarantee

Pre-approval is not a given or a failsafe for an auto loan. It does guarantee an estimated loan amount and interest rate, since your lender has already reviewed your current financial situation. It also gives you a stronger buying position with most of the financial details worked out ahead of time.

However, it does not guarantee final loan approval or vehicle qualification. Pre-approval is conditional and may not accept a vehicle that is too old, too high in mileage or priced above market value. Most pre-approvals also expire in 30-60 days.

How To Buy A Car With Pre-Approved Auto Loan From First Western

Step 1: Gather Your Information.

Before you apply, pull together the documents and details you'll need. This typically includes personal information such as your date of birth, social security number, and home address, as well as employment and income details. Having everything ready ahead of time makes the application process much smoother.

Step 2: Submit Your Application.

Once you have your information together, submit your application to your lender. At First Western, you can do this by phone or in person at your local branch. From there, your lender will review your financial profile, including your credit report and any existing debt, to determine what you qualify for.

Step 3: Receive Loan Pre-Approval.

If approved, your lender will provide a pre-approval letter outlining your estimated loan amount and interest rate. This is your green light to start shopping with a clear budget in hand.

Step 4: Shop Around for the Best Fit.

With your pre-approval in hand, you’re ready to find your vehicle. Because your financing is already worked out, you can focus on negotiating the price of the car itself rather than getting caught up in monthly payment discussions at the dealership. Your pre-approval also opens the door to private sellers, independent dealerships, and only listings, not just dealership lots.

Step 5: Provide the Bank With Your Purchase Agreement.

Once you’ve found your vehicle and agreed to a price, provide your lender with the purchase agreement. Your lender will review the details to confirm the vehicle meets the loan requirements before finalizing everything.

Step 6: Receive Your Loan Check.

After the purchase agreement is reviewed and everything checks out, your lender will finalize the loan and issue the funds. From there, you’re ready to complete the purchase.

Step 7: Send the Title to the Bank After Registration.

Once you’ve registered the vehicle, send the title to your lender. The lender will be listed as the lienholder, meaning they hold a legal claim to the vehicle until the loan is fully paid off. Your monthly payments will typically begin 30-45 days after purchase.

How long are auto loan pre-approvals good for?

Most pre-approvals expire within 30-60 days. Some lenders may allow for more time. They expire for a few different reasons, such as the fluctuation of interest rates and the changeability of credit scores.

If your pre-approval expires before you’ve purchased a vehicle, you may need to reapply or contact your lender for an update.

Why use a local bank rather than dealership financing?

Your local bank may be able to offer competitive rates and personalized offers. And with their pre-approval, any extra fees or add-ons are easier to spot ahead of time. When you already have financing worked out with your bank, you can negotiate car prices separately from your loan. But the top reason to use a local bank is the relationship aspect: a banker who knows you personally and understands your financial goals can help “steer you in the right direction,” because they understand that what you drive is only a part of your overall financial picture.