How Does a Pre-Approved Vehicle Loan Work?

Question from Per: I got pre-approved for a vehicle loan. The amount is 30,000 with Navy Federal. They sent a pre-approval check but I’m not sure how it works as this is my first time buying a car ever. So just looking for insight on how it works once pre-approved.


Congratulations on your pre-approval for a vehicle loan! This is a significant step towards purchasing your first car. Here’s a simple explanation of how it works.

Understanding Pre-Approval

Pre-approval means that the lender, in this case Navy Federal, has already assessed your creditworthiness and decided that you are eligible for a loan up to a certain amount, which is $30,000 in your case. The pre-approval check you received can be used as a form of payment when you find the car you want to buy.

Using Your Pre-Approval Check

Once you’ve found a car that you want to buy and negotiated the price, you can use the pre-approval check to pay for it. Here’s how:

  • Fill out the check with the exact amount that you’ve agreed to pay for the car. Remember, the total amount cannot exceed the pre-approved amount of $30,000.
  • Give the check to the car dealer or private seller. They will deposit it into their bank account.
  • The funds will be transferred from Navy Federal to the seller’s account, effectively paying for your new car.

After the Purchase

After the purchase, you will need to start making monthly payments to Navy Federal to repay your loan. The amount of these payments will depend on the terms of your loan, including the interest rate and the loan period.

Improving Your Credit Score

Making your loan payments on time can help improve your credit score. According to Experian, one of the three major credit bureaus, payment history is the most significant factor affecting your credit score. Here are some steps you can take:

  • Set up automatic payments to ensure you never miss a due date.
  • Keep your credit utilization low. This means not using all of the credit that’s available to you.
  • Check your credit report regularly to ensure it’s accurate.

Remember, managing a loan responsibly can have a positive impact on your credit score, which can make it easier for you to get approved for credit in the future.

Additional Resources

For more information on managing your loan and improving your credit score, consider resources like the Consumer Financial Protection Bureau’s guide to auto loans and the Federal Trade Commission’s advice on credit and loans. These resources provide valuable information on best practices for managing loans and credit.

Leave a Comment