Pre Approve Auto Loan?
October 23, 2010 8:31 AM   Subscribe

I was "pre-approved" for my auto loan by Bank of America, what does that mean?

I am applying for my first auto-loan. I applied for the loan on Bank of America's website. I was "pre-approved" within a few minutes (with a great rate) and told a loan officer will call me on Monday to iron out the details.

1) What will the loan officer ask me on Monday?

2) Is there anything I should know before they call?

FYI: This is anonymous because I am terrified of releasing my financial details online.
posted by anonymous to Work & Money (7 answers total)
Words like "Preapproved" and "Preselected" are gimmicks to get you to open the envelope from the bank or click on the link on the web site. (I work in the credit card industry, though not for Bank of America, and I don't have anything to do with loan applications.)

Keep in mind that pre means before. "Preapproved" is supposed to make you feel special, I guess, like you got some offer that someone else didn't get. I'm not trying to dash your hopes when I say this, but all it means is you haven't been approved yet.
posted by emelenjr at 8:53 AM on October 23, 2010 [1 favorite]

Basically, you'll know how much the bank will lend you to spend on a car, so I'd imagine they'll ask if you have a car in mind already, when you expect to make a purchase, how much you'll put down, etc.

Congratulations! Good credit has its rewards.
posted by xingcat at 8:53 AM on October 23, 2010

As emelenjr points out, pre-approved really means nothing. It is a way to get the fish on the hook in the hope of landing it. You haven't been approved for a loan until you have been approved.

Keep in mind that the banks aren't doing you a favor. They are trying to sell you a loan because that is how they make money. Prices for loans will vary so shop around to various banks and especially credit unions. Just like in the grocery store, the most heavily advertised brands are likely to be most expensive.
posted by JackFlash at 9:12 AM on October 23, 2010

If you're looking for alternatives, I've used CapitalOne Auto's "Blank Check" auto loan and was very happy with it. Basically, the borrower is approved up to a certain amount and the lender forwards a blank check authorized up to that amount. The lender uses that to purchase the car. The advantage for the buyer is certainty on the rate, which eliminates one piece of the negotiation.
posted by notyou at 10:27 AM on October 23, 2010

It is pure marketing-speak. You are not a beautiful unique snow-flake, you just fell for their marketing. Don't worry, you might still be able to get a good deal with them, but definitely shop it around. Auto loans are a competitive market and searching online will just yield you a million and one affiliate sites of affiliates trying to sell your lead information to loan providers. Good luck...
posted by Elminster24 at 11:09 AM on October 23, 2010

Okay, pre-approval is actually a term with some content to it. It may be marketing, but it's not completely devoid of meaning.

What they're basically saying is that they've looked at your preliminary information, i.e. your credit report, and concluded that you meet the basic criteria for a loan at a specific rate. You'll still have to work out the details with an actual loan officer, but the bank is basically telling you that the money is there for the asking.

That's not "pure marketing-speak," because not every can be pre-approved. But Elminster24 is right that if you are pre-approved, other banks will probably want to loan you money too, and you can save a good deal by shopping around for a lower rate.
posted by valkyryn at 11:19 AM on October 23, 2010 [1 favorite]

"preapproval" is a clever turn of phrase— it sounds like it means you've been approved ahead of time (pre-approved!) but it actually means you've gone through the parts of the process that happen before they approve anything (the pre-approval stuff). So it's not utterly meaningless but it doesn't mean they've approved a loan, just (I assume) that they haven't rejected the idea out-of-hand.

Anyway, to answer your other questions, when I've talked to banks about loans, what they want to know is: how much downpayment am I going to make, how much monthly payment can I make. People can be overoptimistic about what they can afford, so the bank asks what other debt you have and how much money you make. Don't be afraid to ask questions yourself: eg, what would the numbers look like if you bought a more/less expensive car, if you paid the loan off over a longer/shorter time? Write it down and compare to offers you get from other banks.
posted by hattifattener at 12:48 PM on October 23, 2010

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