Get Pre-Approval for a Car Loan (2023) (2023)

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James updated on 2023-04-03


Did you know that 2% more Canadians planning to finance a car in Canada this quarter than last? Getting pre-approval for a car loan continues to grow in popularity.

It may seem redundant at first, but there are real benefits to getting a pre-approved car loan when shopping for a new or used vehicle.

In the guide below, you will find out why more and more Canadians are opting towards pre-approval for their car loans and if it is the right decision for you.

What is pre-approval for a car loan?

Car loan pre-approval simply means that a bank, dealership or online lender looks at your information to see how much money you could borrow and at what rate before you buy a new or a used car. While it doesn't guarantee you'll get approved, it makes it more likely.

Pre-approval can help you determine how much money you can spend when shopping for a car. It's also an excellent tool for budgeting, as you can see how much you'll need to pay back to the lender if approved.

The pre-approval process is fast and easy. The lender will ask you for basic information including:

  • Your name
  • Your income
  • Outstanding debt

They'll also check your credit score to see how reliable you are at paying back loans. While a good credit score gives access to the best car loan rates, specialized lenders also offer options for bad credit car loans.

How does pre-approval work for a car loan?

Getting pre-approved for a car loan is similar to filling out a car loan application.

You'll need to apply for the car loan pre-approval by speaking to and filling out a form with your chosen lender. You'll have to give your personal details, how much money you owe and how much you make. The lender will also check your credit score.

The provided information will determine how much you can afford, what the interest rate will be and if you have a good record for repaying debt.

Pre-approval usually lasts for a few months (60 to 90 days). You can apply for pre-approval with multiple lenders to find the best rates, amount and term for you.

Once you have your pre-approval you're ready to go car shopping with a clear budget in mind.

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Does pre-approval guarantee a car loan?

While a pre-approved car loan doesn't mean you're guaranteed to get the loan, it is rarely a problem. The pre-approval is the lender's initial check to see what amount and rate you are eligible for.

Before you officially get the loan, they will need to finalize the application. They will ensure that no major changes have happened to your finances and credit while you have been car shopping. They will also collect documents to back up the details you gave in the pre-approval, such as photo ID and proof of employment.

You could be denied a loan if your credit score drops, your income changes or you have more debt than when you first spoke with them. A problem with the car you want to buy is another reason to deny a loan. Finally, you could also be denied if you didn't give correct information when you applied for pre-approval.

How long does it take to get pre-approval for a car loan?

Sometimes a car loan pre-approval can happen in just a few minutes, while other times, it can take a few days. The time it takes to get pre-approval for a car loan in Canada can vary depending on the lender, your credit, income and your current debt. Making sure that you have all of your documents in order will help expedite the process.

Going to a car dealership may take longer as they have to work with their lending partner to find out if you can be pre-approved. The time will depend on the dealership and its relationship with the lender.

Expert advice

Remember to shop around and compare offers from different lenders to get the best terms and interest rates for your car loan.

Does car loan pre-approval affect your credit score?

Good news! Pre-approval for a car loan won't affect your credit score. The lender must do a credit check, but it is only a soft inquiry at this stage. They look at just enough credit information to see if you qualify for a loan.

Your credit is only affected if you decide to apply for the loan after the pre-approval. At that point, the lender must do a deeper, 'hard inquiry'. Regardless of if you are approved or denied for the loan, a hard inquiry will temporarily lower your credit score by a few points.For most people, this isn't a big deal. However, multiple hard inquiries in a short period of time can be problematic. It's smart to only go this far with one lender.

Different lenders may also have different rules for pre-approval, so it's a good idea to ask them what kind of inquiry they use before you apply.

Good to know

Making sure you get a pre-approval will give you a better sense of the amount, rate and term you can get before the application and avoid unnecessary damage to your credit score.

When is it worth getting pre-approval?

You can't really go wrong with getting pre-approval for your car financing. Below are some of the main ways taking the time to get a pre-approval is beneficial:

  • Have more bargaining power when negotiating the sale of the car.
  • Knowing your monthly payment gives you the confidence you can repay the loan.
  • Getting a budget limit means you are less likely to damage your credit score with a declined application.
  • Know how strong your credit score is. If it is too low, you know you will need to work on it before applying.
  • Shopping around becomes easier when you have pre-approved rates and terms to compare.
  • Dealerships may offer special deals for pre-approved buyers, which could save you money.

Pre-qualification vs pre-approval: What’s the difference?

Pre-qualification and pre-approval are common terms you may hear when working on securing a car loan. You may see the terms used interchangeably. Depending on which lenders you work with, the difference can be minimal. Here's how you can think of them:

  • Pre-qualification: The buyer generally has initiated the first step of the loan process.
  • Pre-Approval: The lender has initiated the first step of the loan process (the buyer has responded).

Pre-approval is typically a more rigorous check than pre-qualification, with a higher likelihood of being approved for the loan. Pre-qualification and pre-approval follow the same principles and benefits, which is why many companies use the terms synonymously.

Pros and cons of getting car loan pre-approval

While getting a pre-approved car loan has a lot of positives, like everything, it can still have a few disadvantages. By weighing the pros and cons, you can better determine if a car loan pre-approval is right for you.


  • Know your budget: With pre-approval, you'll know how much you can afford to spend on a car, which can help you narrow down your choices and avoid looking at vehicles that are out of your budget.
  • Better bargaining power: You'll be in a stronger position to negotiate with the dealer or seller on the price of the car as you'll be viewed as a serious buyer with financing lined up.
  • Peace of mind: Knowing you have financing lined up can give you confidence while shopping for a car, making it more convenient than securing financing at the last minute or losing the car to another buyer.
  • Interest rate protection: When you get pre-approved, you'll receive an interest rate quote, which can be locked in for a period of time (usually 30 to 60 days). This can protect you from interest rate hikes while shopping for a car.


  • Not a guarantee: Pre-approval is not a guarantee of loan approval. The lender can still deny your loan application after reviewing your credit worthiness and financial situation.
  • Limited choice: Pre-approval may limit your choice of lenders and loan options since you'll be working with a single lender.
  • More paperwork: The lender will still need you to provide information on your financial situation, job and the documentation to match before officially approving your loan. Some of this information matches what you must provide for the pre-approval application.
  • Limited time: Pre-approvals usually have a limited time, typically 30 to 60 days. If you don't find a car and finalize the loan within that time frame, you'll need to go through the pre-approval process again.

How to apply for a pre-approved car loan?

In most cases, you can get pre-approval for a car loan from your chosen lender's website or by visiting them in person (such as a bank or dealership).

Most lenders will consider the following when looking at your eligibility:

  • Your credit score - Typically to qualify for a loan, your credit score will need to be 660 or higher in Canada. You may still be eligible but with higher interest or a co-signer if you have a lower score.
  • Income - You will be asked about your job to ensure you have a steady income to repay the loan.
  • Debt to income ratio - A high percentage of your income already going to other debts and monthly payments may affect your eligibility.

To get pre-approval, the form is easy. It asks basic information about who you are and your financial situation. Ultimately, lenders want to approve you for the loan while ensuring they have the peace of mind you will repay the debt. They make the process quick and painless.

Can I get pre-approval with bad credit?

Pre-approval for a car loan when you have bad credit can seem impossible, but it isn't. Several lenders can still help you if your score isn't quite where it needs to be.

The average credit score to be approved for a loan in Canada is 660, but below this, you can still apply for pre-approval on your car loan. A lender may still offer you a loan with negotiated terms such as higher interest rates or a longer loan term.

A car loan co-signer with good credit can assure the lender that the loan will be repaid and may be an excellent option to explore. Your lender will likely suggest this if they find your pre-approval request questionable.

Good to know

Having a co-signer can increase your chances of approval, and a lower interest rate may be possible

Can I get car loan pre-approval online?

Online pre-approval is popular, and with the convenience of filling out the application from the comfort of your home and outside of standard office hours, it is easy to see why.

Most lenders will have an online pre-approval form. Here are some popular lenders with online pre-approval applications:

  • Royal Bank of Canada (RBC): Car loan pre-approval through their website.
  • Toronto Dominion Bank (TD): Car loan pre-approval through their website.
  • National Bank of Canada: Car loan pre-approval through their website.
  • Car Loans Canada Online Lender: Car loan pre-approval through their website.

Good to know

It's still popular to work with dealerships in-person, but don't confuse this with being an inconvenience. With dealerships being a one-stop shop with customer care in the automotive industry, they can boost the buying experience for their customers.

The list above is not exhaustive. Many lenders in Canada offer excellent service and rates for car pre-approvals. It is essential to select lenders that fit your personal circumstances.

Want to start exploring your options? Hit the button below to start car loan shopping.

Dreaming of a new ride?Shop car loans now

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