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Auto financing: Prequalification vs. preapproval Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make smarter financial decisions by offering interactive tools and financial calculators as well as publishing original and impartial content. We also allow you to conduct research and compare data for free - so that you can make sound financial decisions. Bankrate has agreements with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this website are provided by companies that pay us. This compensation may impact how and where products appear on the site, such as for instance, the sequence in which they appear within the listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. This compensation, however, does affect the information we publish, or the reviews that you see on this site. We do not cover the vast array of companies or financial deals that could be available to you.



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3 min read Published November 02, 2022
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The prequalification process and the preapproval procedure are alternative methods of getting an initial read on the options for financing your car. Prequalification isn't as strict and requires only basic information regarding your financial situation and provides you some idea of rate and terms you might qualify for. Preapproval requires you to share more financial and personal information with a lender, since it is essentially an application that is only partial. The difference between prequalification and preapproval A is a formal request from an lender, with conditions, and provides an estimate of what car loan terms you might qualify for. Since prequalifications aren't firm, it's not much useful when you're negotiating with an auto dealership. It doesn't matter if you go with preapproval or a car loan preapproval or prequalification, neither are guaranteed offers -- final approval will depend on the underwriting department of the lender finding no surprises in your full credit history , as well as other aspects like income and employment verification. Advantages of preapproval and prequalification for auto loan Preapproval as well as prequalification both preapproval as well as prequalification let you get a good grasp on how much money you could borrowand the amount you will pay to borrow it. Benefits of preapproval With preapproval allows you to shop with confidence, knowing that you'll likely receive the same or very comparable interest rates. It is also possible to make use of your preapproval rate an indication to the dealership when you go to the finance department, placing the dealership under pressure to beat the rate. Benefits of prequalification Prequalification is an easy way to find out the type of loan you could get, especially if you aren't yet ready to shop with a serious. Your credit score isn't impacted since the lender will not conduct a thorough credit check. What should you be aware of when you apply for auto loan prequalification and preapproval If you apply for a prequalification for an auto loan, you get an approximate estimate of the loan amount and rate you'll be offered. Then, you can use this information to search for the most competitive rate, but be aware that prequalification does not constitute an official offer. Rates aren't guaranteed and their legitimacy is contingent on how accurate the information you supply is. Preapprovals don't guarantee anything either. If your income, employment or credit significantly change between the time you're preapproved and the time you apply, you could be denied the loan. Keep this in mind while shopping and be cautious about spending, particularly with credit cards. How to get preapproved for a car loan If you decide that is the right choice for you, you will need to gather the necessary documents and then submit an application for preapproval. It is suggested that you look into reputable lenders prior to applying. Once you've been preapproved and approved, you'll have a clear idea of what you can spend and have control when it comes time to negotiate. Preapproved car loans generally last for between 30 and 60 days. If you are for preapproval, there are a few steps you could follow. Examine your application for errors, increase the amount of your down payment, decrease your overall debt or try a different lender. Before you try a new lender, however, be sure to discuss the reasons of the rejection with the one you submitted your application to. The information you must provide to prequalify or be preapproved Preapproval and prequalification require certain information. Make sure you provide the following information the following information: Personal information, like your address, name, and phone number. Financial information, such as your earnings and the amount you pay for housing. Information regarding the loan, including how much you want to borrow. Preapproval is likely to require additional details, such as the Social Security number and birthdate so the lender can pull your full credit report. This is referred to as a hard credit pull, and will temporarily lower your credit score a few points. The bottom line is that prequalification and preapproval are two useful tools for understanding the amount you can spend on your auto loan. Preapproval can even help you find a lower rate on the dealer if you're thinking about financing it. However, these offers aren't guaranteed, so spend wisely while you're shopping. Find out more


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Written by

This article was generated by using automated technology. It was then thoroughly edited and fact-checked by an editor from our editorial team.



Editor: Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate from late 2021. They are passionate about helping readers gain the confidence to control their finances with clear, well-researched facts that break down otherwise complicated subjects into digestible pieces.






Auto loans editor


Review by Mark Kantrowtziz. Reviewed by Nationally recognized expert on student financial aid

Mark Kantrowitz is an expert on student financial aid, the FAFSA and scholarships, 529 plans educational tax benefits, student loans.






Nationally recognized student financial aid expert




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