when looking for pre-approval on a car loan you should not…


Car shopping is an exciting process, but getting pre-approved for a car loan is an important step that requires diligence. While pre-approval gives you negotiating power at the dealership, there are some key things you’ll want to avoid doing that could hurt your chances of securing the best interest rate.

In this article, we’ll explore the top mistakes to avoid when seeking car financing pre-approval in 2024.

Mistake #1: Not researching multiple lenders

One of the biggest mistakes is only applying for pre-approval with one lender, like your local bank or credit union. While these familiar lenders are often convenient options, they may not offer the most competitive rates. Get quotes from several different lenders to compare rates and terms before deciding.

Consider applying with both traditional banks and online lenders. Online lenders often have lower overhead costs than brick-and-mortar banks, so they may be able to offer lower rates. However, be sure to thoroughly research any online lender to ensure they are reputable.

Take the time to get quotes from 3-5 lenders before selecting who you will use for pre-approval. This allows you to negotiate and take the lowest rate to the dealership. Skipping this comparison shopping step could cost you hundreds extra in interest over the life of your loan.

Not Researching Multiple Lenders
Not researching multiple lenders

Mistake #2: Not having your documentation in order

When applying for pre-approval, lenders will want to verify your identity, income, residence details, and get a read on your credit history. Going into the application unprepared will only slow things down. Make sure to gather these key documents ahead of time:

  • Valid driver’s license or state ID
  • Proof of income (pay stubs, W-2s, or tax returns)
  • Proof of residence like a utility bill
  • Social Security number
  • Bank account and routing numbers (if applying online)

Not having these readily available can cause delays as lenders wait for you to provide missing info. Take the time upfront to organize your paperwork so the pre-approval process moves smoothly.

Not Having Your Documentation In Order
Not having your documentation in order

Mistake #3: Not following up on the pre-approval status

It’s easy to forget about your pre-approval offer once you receive it if you haven’t scheduled car shopping yet. However, your approval is usually only good for a set period of time – often 30 days or less.

Make sure to stay on top of the expiration date and re-apply if needed. You’ll also want to check in periodically with your lender if the car buying process stretches longer than anticipated. Interest rates can change over time, so an older pre-approval may no longer be valid.

Communicate proactively with lenders during the car shopping and negotiation stages. With current economic uncertainty, approval periods may become shorter in 2024. Not maintaining contact could cause your pre-approval to unexpectedly expire before the sale is finalized.

 Not Following Up On The Pre-Approval Status
Not following up on the pre-approval status

Mistake #4: Overestimating your chances of approval

It may be tempting to fudge the numbers a bit when applying, hoping for the best. But being unrealistic about your financial situation will only backfire. Lenders will verify all the information you provide against your credit reports.

Lying or purposely omitting details like debt obligations, income sources and amounts, or an existing car loan could cause your application to be denied. Honesty is always the best policy with lenders – they want accurate representations of your ability to repay.

Realistically assess your credit profile, income level, and existing debt load before applying. If you have subprime credit, an incomplete credit history, or are stretching your budget too thin, waiting to build your profile more may lead to better rates and terms down the line.

Verestimating Your Chances Of Approval
overestimating your chances of approval

Mistake #5: Not shopping rates after being denied

If your pre-approval application is declined, don’t give up on car financing altogether. Ask the lender for specific reasons why you were turned down, like credit scores being too low, too much existing debt, etc. Then consider reapplying with different institutions to see if they may offer better terms.

The credit reporting agencies make mistakes sometimes, so inaccurate information could wrongly impact an initial application as well. You have the right to check your files and dispute any errors. Correcting reporting issues may qualifying factors for another lender.

There are also ways to potentially build credit faster, like becoming an authorized user on someone else’s account, to strengthen a borderline application in time. With determination and adapting your strategy, denial doesn’t have to be the final word.

Mistake #6: Not negotiating the approved rate

Just because a lender grants you a certain interest rate during pre-approval doesn’t mean it’s the best they can do. Rates are rarely fully transparent upfront and lenders have room to maneuver. Use your approved pre-approval as leverage at the negotiating table.

If you’re working with multiple lenders, you can play them off each other by bringing competing offers. Mention what other institutions are offering to see if your original lender is willing to match or beat it. Strong credit profiles especially have power to get rates lowered.

Don’t be afraid to respectfully haggle a bit. A slight reduction, even half a percentage point, can add up considerably over the life of a multi-year auto loan. Make the most of the pre-approval to get the lowest rate that truly fits your situation.

Not Negotiating The Approved Rate
Not negotiating the approved rate

Mistake #7: Not understanding loan terms and structures

When reviewing financing offers, be sure you fully comprehend important terms like the interest rate, loan length, monthly payment amounts, penalties for prepayment, and any origination or documentation fees. Ask lenders to clearly explain multi-year payment schedules.

Also understand common loan types – is it simple interest or compound interest? Are you signing up for a standard loan or one structured with a balloon payment at the end? The technical details matter, so don’t hesitate to request clarification until you have full confidence.

Not Understanding Loan Terms And Structures
Not understanding loan terms and structures

Mistake #8: Not improving your credit before applying

If your credit scores could use some help, take proactive steps in the months before pre-approval season. Make all existing debt and bill payments on time and pay down credit card balances to lower credit utilization ratios.

You may also consider adding yourself as an authorized user on an account with a long positive history to boost the average age of accounts reporting on your credit reports. Responsible credit management takes time but can significantly impact approval odds and rates offered.

Mistake #9: Not understanding the impact of your credit score

Lenders use credit scores as a primary indicator of risk, so your numbers will heavily weigh on rates and terms presented. Learn how different scoring models work and what factors influence each digit. Track your reports regularly to avoid surprises.

Minor decreases in a few points could mean the difference between the best and average rates. If your scores are borderline, consider delaying the loan process briefly to improve them. Establish a solid number for negotiating leverage.

Mistake #10: Not having the right co-signer or down payment

Ideally, you’ll have a strong enough application to qualify solo. But in some cases, adding a co-signer with excellent credit or putting money down can help obtain approval or improve offers substantially.

Consider family or friends able and willing to co-sign only if needed. Otherwise, save for an adequate down payment percentage before applying to demonstrate financial stake in the purchase and lower risk for lenders.

Not Having The Right Co-Signer Or Down Payment
Not having the right co-signer or down payment

Don’t Submit Multiple Applications in a Short Time Span

While it may seem harmless, avoid applying for numerous car loans at different lenders in rapid succession. Every time a hard credit inquiry is made by a lender, it shaves a few points off your credit scores temporarily, which can make a difference in rates offered.

Too many inquiries in a short window also raises red flags that the borrower may be over-leveraged or desperate for any credit terms possible. It’s best to limit applications to only one or two lenders maximum within about a 30 day period.

You’ll still get to compare multiple pre-approvals. Just spread the applications out wisely over a month or so instead of flooding lenders with requests all at once. Controlling the number and timing of inquiries is a minor tactic that can yield a better overall credit standing and financing options early on.

Don’t Ignore Loan Terms and Conditions

Be sure to read through all documentation provided by lenders very carefully during the pre-approval process. Pay attention to details like loan amounts, terms, required down payments, interest rates, fees and penalties.

Make certain you understand requirements for proof of income, any obligations after approval expires, and what happens if you don’t end up purchasing a vehicle. Ask questions to clarify anything uncertain.

Failing to understand full terms and conditions could lead to surprises, disappointment or extra costs later on. Go in with open eyes about requirements and obligations on both ends.

Don’t Assume Pre-Approval Means Automatic Approval

Just because a lender pre-approves you at a certain rate and terms doesn’t necessarily equate to a 100% guaranteed approval once you find a vehicle and apply for the actual loan.

Final approval hinges on re-verification of all financial particulars close to purchase. If anything changed significantly, like delinquencies, less income or a bankruptcy, denial is possible despite previous pre-qualification.

Maintain prudent finances between pre-approval and purchase time to keep your credit profile strong enough to pass full underwriting. Don’t take pre-approval as a done deal without ongoing financial responsibility.

Don’t Forget About Taxes, Fees and Additional Costs

When considering your budget and what you can afford each month, don’t limit factors to just the loan payment. Be sure to also account for taxes, title/registration costs, and additional loan-related fees.

These additional expenses could easily run into the hundreds or more depending on where you live. Research what to expect for your specific location.

Building a realistic overall purchase and ownership budget provides the best guidance for pre-approval rather than focusing narrowly on just the monthly payment amount.

Don’t Miss Out on Rewards for On-Time Payments

Some lenders provide incentives or benefits for maintaining an excellent payment history, like access to lower refinance rates later on if choosing to repay early.

Ask pre-approval sources about any loyalty programs, on-time payment reductions after 12 months, or other perks geared towards responsible borrowers.

Knowing these options upfront gives you greater motivation to stay current and maximize the value of any rewards over the full loan term.


Does a car loan pre-approval hurt your credit?

A car loan pre-approval requires a hard credit inquiry, which can slightly lower your credit scores temporarily. However, the impact is minimal—only a few points—and it’s outweighed by signaling to lenders that you shopped rates. Multiple inquiries for the same type of credit within a limited period also only count as one inquiry. So the minor, temporary ding is worth securing the lowest rate.

Should you get pre-approved before buying a car?

Yes, getting pre-approved for an auto loan before car shopping is highly recommended. It allows you to know your estimated budget and interest rate upfront. This empowering information gives you an edge at dealerships to negotiate the best OTD price. Plus, many dealers won’t work with buyers without pre-approval, and those who do may only offer less competitive on-lot financing. Getting rates from several lenders takes some homework but saves significantly on interest costs.

Which of these is not important to consider when selecting a credit card?

The interest rate is important to consider when selecting a credit card. Other important factors are the annual fee, rewards program, and balance transfer options. Customer service quality is not as directly important when initially selecting a credit card.

Where is the best place to get pre-approved for a car loan?

The best place to get pre-approved for a car loan is by applying with multiple lenders to compare rates and terms before even starting your dealership shopping. This includes local banks and credit unions as well as large online lenders. Getting quotes from several different options allows you to negotiate using the lowest approved rate to get the best possible deal on a new vehicle purchase.


Obtaining car loan pre-approval is a crucial part of strategizing your vehicle purchase. While it may seem like an extra step, taking the time to navigate this process effectively can result in substantial interest savings over the life of your loan. This article outlined several important guidelines to keep in mind.

The first mistake discussed was only applying to one lender, rather than casting a wider net to capture the most competitive rates. Shopping offers from multiple traditional and online sources allows you to negotiate using their bids against each other.

This approach almost always results in lower pricing than relying on a single familiar bank or credit union. It is also important to have all necessary documentation in order before submitting applications. Lenders need to swiftly verify details like your identity,

income levels, residence, credit history, and existing debt obligations. Going into the process disorganized wastes everyone’s time. Preparing paperwork upfront ensures smooth sailing. Keeping close communication with lenders after approval and prior to finalizing a purchase is another key.

Following up regularly is important because approvals have expiration windows. Rates can also change over longer shopping periods. Securing multiple approvals gives buyers options to select the best offer still available when signing contracts.

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