Loan pre approval: Taking the stress out of waiting

2007-03-08 10:33:40

( Financial )



When waiting for a car loan approval, there is the uncertainty of guessing, and the stress of waiting for the outcome. This leads you to thinking about how nice it would be to know the reality of your situation. The good news is, there is a way for you to ascertain how much you can possibly borrow before your actual loan is released.

What is pre approval?
Loan pre approval takes place when a lender officially probes your finances in detail and agrees beforehand to a loan amount and terms. A loan pre approval gives you the advantage of knowing exactly how much you may spend on, lets say a new home. A pre approval also strengthens contract offers and increases a sellers confidence in your ability to obtain the funding needed for your property.

The pre-approval process
A pre-approval requires that the lender take out your credit report from a credit reporting agency. This is used to verify your income, debt, credit and assets. Based on your credit report, the lender analyzes your financial situation and determines the amount you may borrow.

While a pre approval is not a guarantee, it is an assurance from a bank or lending institution that you are likely to qualify for a loan. If your loan application is accepted, a pre approval is valid only for a couple of months. This gives you a chance to go house hunting. If the pre approval period expires before you decide to take out the loan, you can apply again. Unless there is a significant drop in your credit rating, a pre approval is very likely again. You must do everything possible to maintain your good credit rating until you decide to take out your loan. The number of times you can apply for a loan pre approval is limitless and will not cost you, as lenders generally do not charge fees for pre approval applications.

By the time you receive your pre approval letter, you are ready to commit to the project you have intended to use your loan for.


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