An auto loan pre-approval is a process through which a lender evaluates your financial history to determine if you qualify for a loan before you make a purchase. A pre-approved loan will specify a loan amount, interest rate, and loan term.
This beneficial process makes buying a vehicle less complicated and stressful. Here is how you can get pre-approved for a credit union auto loan and find a car that suits your budget!
Step 1: Choose a Credit Union
Credit unions are member-owned, which often translates to better interest rates and more flexible loan terms. They take a member-centric approach, potentially making it easier for you to navigate the pre-approval process. Look for a credit union with favorable membership qualifications, such as your employer, location, or social organization.
Step 2: Gather the Required Documents
Each of these documents is key for auto loan pre-approval. You’ll need the following information at the ready for the credit union to evaluate:
Proof of Identity
The lenders are required by law to receive proof of identity before issuing a loan. This can be as simple as bringing your driver’s license, passport, social security card, or another form of government-issued ID.
Proof of Income
Credit unions want to know that you have an income that allows you to pay off an auto loan. You’ll need documents such as pay stubs, W-2s, and income tax returns to prove you can afford the loan.
Financial History
To paint a complete picture of your financial status, be ready to submit a list of your current financial obligations, such as existing loans and credit card debts. Also, compile records of your savings, investments, and additional income sources.
Proof of Residency
It doesn’t matter if you own a home or rent an apartment. Proof of residency documents—a utility bill, insurance, mortgage statement, or lease agreement—will suffice.
Auto Insurance and Vehicle Information
When seeking pre-approval for an auto loan, presenting your current auto insurance details and vehicle information may not be necessary. Still, they can be highly beneficial for approval. Most credit unions want to know that you carry auto insurance.
Many buyers decide to trade in their previous vehicle to receive their new ride for a discounted price. In this case, bring your previous vehicle’s information and proof of insurance along for the pre-approval process.
Step 3: Check and Improve Your Credit Score
Your credit score is a snapshot of your creditworthiness and directly impacts the offered interest rate. A high credit score means low interest rates. To improve your credit score, pay off existing debts, make payments on time, and avoid opening new lines of credit.
Step 4: Await Auto Loan Approval
After submitting your loan application, the credit union's underwriters will review your financial standing and the details of the loan request. Keep in mind that the approval process can take anywhere from a few hours to a few days.
It may be a nerve-wracking wait, but remember that pre-approvals are usually valid for a set period. This will give you plenty of time to shop around for the right car.
Navigating the pre-approval process for a credit union car loan can seem complex. Follow these steps to get pre-approved for a credit union auto loan, and reap the benefits of your efforts!