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Auto financing: Prequalification vs. preapproval Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators that provide objective and original content. This allows users to conduct research and compare data at no cost to help you make financial decisions with confidence. Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The deals that are displayed on this site are from companies that pay us. This compensation could affect how and when products appear on the site, such as, for example, the sequence in which they appear within the listing categories, except where prohibited by law. This applies to our mortgage home equity, mortgage and other home lending products. This compensation, however, does have no impact on the information we provide, or the reviews you see on this site. We do not include the vast array of companies or financial offerings that could be accessible to you.
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3 minutes read. Published November 02, 2022.
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Prequalification and preapproval are two different ways to get an initial understanding of the options for financing your car. Prequalification isn't as strict and requires you to provide the most basic details about your financial status, and provides you estimates of what rates and terms that you could be eligible for. Preapproval requires sharing more personal and financial information with a lender, since it's basically a partial application. The difference between prequalification and preapproval A is that it's a formal invitation from an lender, with conditions, and is an estimate of the type of you could be able to get in terms of car loan terms you might qualify for. Since prequalifications aren't an official offer, it's of no to use when trying to negotiate with an auto dealership. It doesn't matter if you go with a car loan prequalification or preapproval, neither of them are guaranteed offersthe final approval of your loan will be contingent on the lender's underwriting department making sure there are no surprise in your complete credit history and additional factors like income and employment verification. Benefits of auto loan Preapproval as well as prequalification both preapproval as well as prequalification let you get an idea of much money you can feasibly borrow, and how much you'll have to pay for it. Advantages of preapproval When you have preapproved allows you to shop with confidence knowing that you'll likely receive the same or a similar interest rate. You can also make use of your preapproval rate an indication to the dealership when you go to the financing office, putting pressure on them to beat the rate. Benefits of prequalification Prequalification is an easy method to determine the kind of loan you can get even if you're not prepared to begin shopping with a serious. Credit scores aren't affected as the lender will not conduct a thorough credit check. What to keep in mind with auto loan prequalification and preapproval If you apply for a prequalification for an auto loan you will receive an estimate of the loan amount and the rate you'll be offered. You can then use this information to compare prices to find the most competitive rate however, keep in mind that prequalification does not constitute an official offer. Rates aren't guaranteed and their legitimacy is contingent on how exact the information you supply is. Preapprovals aren't a guarantee either. If your income, employment or credit significantly change between the time you're preapproved and when you fully apply, you may be refused the loan. Be aware of this when shopping and be cautious about spending, especially with credit cards. How do I be preapproved for an auto loan If you decide that is the best option for you, then you'll need to gather the necessary documents and fill out a preapproval application. It is advised to research several reputable lenders before applying. After you've been approved, you will have a clear idea of the amount you are able to spend and have control when it's time to bargain. Preapproved car loans are usually valid for between 30 and 60 days. If you're preapproved you have a few actions you can do. Check your application for mistakes, increase your down payment, reduce your total debt, or even try another lender. Before attempting to work with a different lender but, do discuss the reason of the rejection with the one you applied with. Information you need to provide to be prequalified or prequalified Preapproval and prequalification require some of the same information. Make sure you provide the following information personal information such as your address, name, and your phone number. Financial information, such as your income and housing payment. Information about the loan that you are applying for, such as the amount you're looking to borrow. The preapproval process will likely require you to submit more details, such as details about your Social Security number and birthdate to ensure that the lender can access your complete credit report. This is referred to as an "hard credit pull" and will temporarily lower your credit score by several points. In the end, prequalification and preapproval are two useful instruments for gauging how much you can spend on an auto loan. Preapproval could even allow you to find a lower rate on the dealer if you're considering financing through it. However, these offers aren't guaranteed, so spend wisely while you're shopping. Learn more
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Written by
The article was created with the help of automation technology, and then verified and edited by an editor on our editorial staff.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to take control of their finances with precise, well-researched and accurate facts that break down complicated topics into bite-sized pieces.
Auto loans editor
Reviewed by Mark Kantrowtziz Reviewed by Nationally known student financial aid expert
Mark Kantrowitz is an expert on student financial aid The FAFSA and 529 plans, scholarships as well as tax benefits for education and student loans.
Nationally anerkannt student financial aid expert
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