Arrange car loan before purchase2/21/2024 Pre-approvals can be difficult to qualify for if you have bad credit. Some borrowers can’t quite get their hands on a direct auto loan, especially if they're dealing with bad credit. The dealership may tell you that they have lenders financing for a lower rate, and suggest you drop your pre-approval and finance with them, instead. You can use this rate as a starting point, and see if the dealer can offer you a lower rate to finance through their lenders. Say you were pre-approved for a 5% interest rate with your bank. If you explore the dealership's financing options before you mention your own financing, you can compare their interest rates against your direct loan rate. ![]() Getting better rates with a pre-approval. Most dealers are signed up with third-party lenders that you can apply for at their location, and these lenders sometimes assist bad credit borrowers. However, if you don’t tell the dealer immediately that you have auto financing, more than likely, they inform you of all the lenders they’re signed up with through their finance and insurance (F&I) department. Telling a dealer upfront that you have financing could lead to potential markups since the dealer knows they won't be making money financing a vehicle through their lenders. If you walk into an auto dealership and tell the salesperson you have a pre-approval you could lose your only bargaining chip to lower your interest rates. Your Pre-Approval Can Become a Bargaining Chip With a pre-approval, you can go to a dealership and shop like a cash buyer. If you qualify for a car loan, you get a pre-approval that determines the maximum amount you can finance. Usually, this means heading to a direct lender such as a bank, credit union, or online lending service for financing. Getting your own financing before you walk into a dealership means taking out an auto loan somewhere else. Choose your financing and finalize your contract. ![]()
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