Pre-Approved Vehicle Finance – What Exactly Is It?
Are you planning to buy a car? Getting a new vehicle is a decision that needs careful thinking and deep budget considerations.
Pre-approved vehicle finance is one way to make it easier for you to focus on what you should buy instead of worrying about financing.
What is Pre-Approved Vehicle Finance?
Pre-approved vehicle finance is a provision that guarantees you to receive a vehicle loan even before you even select a car to buy.
When you get pre-approved, the bank will give you a quote of how much they can lend you and a letter of commitment that you can take to the car dealership. With a guaranteed loan on hand, you can freely enter a showroom with the confidence that you can buy a car within the approved loan amount.
Pre-approved vehicle finance is valid on either new or pre-owned cars.
New vehicles are usually given lower interest rates compared to pre-owned vehicles because they have a lower chance of claiming insurance. For pre-owned cars, lenders will usually put limitations on the age and mileage of the vehicle you can select.
Advantages of Pre-Approved Vehicle Finance
Why get pre-approved vehicle finance instead of the usual car loan? Here are the benefits to consider before applying for financing:
- You’ll have a stricter budget
Pre-approved vehicle finance helps you make good purchasing decisions because you already have a pre-defined budget for the loan. You can control overspending and avoid falling for sales marketing techniques that will make you buy things you don’t need.
- You’ll have a sure financing source
Pre-approved vehicle finance is as good as an actual loan. So, choose the vehicle you want without worrying whether you have the budget or a high enough credit score to purchase a new or pre-owned car.
Requirements for Pre-Approved Financing
The requirements for applying for pre-approved vehicle finance is similar to other loans:
- You should be a South African citizen or a permanent resident who is at least 18 years old
- You’re permanently employed with a fixed monthly income
- You have a valid SA driver’s license
- A good credit standing
Getting A Pre-Approved Vehicle Finance
Here are the steps you’ll undergo in taking a pre-approved loan:
- Submit the requirements
When you apply for pre-approved vehicle finance, the lender will first conduct a credit check to determine your eligibility. Lenders will also ask for your driver’s license to know what type of vehicle you can drive.
- Calculate the loan amount
After checking your creditworthiness, you’ll be given an estimate of how much money they can lend you. The figure will be based on your monthly income and credit rating.
You can also calculate the ballpark figure of the loanable amount using calculators online.
- Structure your vehicle finance
When you get approved, you’ll receive a provisional contract containing the loan details. This includes the total amount, monthly repayment, interest rate, and the repayment period.
The National Credit Act (NCA) has made it possible to restructure the provisional contract given to make it more convenient for you to repay your debt obligations. It’s up to you to set the duration of the contract which can be between 12 to 72 months.
You can also choose whether you want to make a down payment or a balloon payment option. It’s also possible to select the type of interest rate (linked or fixed) when structuring your pre-approved vehicle finance.
- Get a vehicle loan insurance
Loan insurance can protect you from unforeseeable circumstances that may prevent you from meeting monthly repayments. It can cover any outstanding balance in case of death, disability, or retrenchment.
Make sure you get this together with your pre-approved vehicle finance to protect you and your family from debt burdens.
Banks Offering Pre-Approved Vehicle Finance
Credit institutions like banks and alternative lenders can offer pre-approved vehicle finance. These are the four most popular banks that can finance your car purchase.
- Standard Bank
- ABSA Bank
Getting pre-approved vehicle finance from banks should be your preferred choice before going to a dealership. In-house vehicle financing often targets buyers that have poor credit scores. They also charge rates that are higher than what banks offer and often include a mark-up on the pricing.
Lastly, avoid telling the salesperson that you already have a pre-approved loan. Letting them know about it will make them less flexible to negotiations.
With pre-approved vehicle finance, it’ll now be easier for you to own a vehicle and make your everyday travel more convenient.