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Auto financing: Prequalification vs. preapproval Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial choices by providing you with interactive financial calculators and tools as well as publishing original and impartial content, by enabling you to conduct research and compare data at no cost - so that you can make informed financial decisions. Bankrate has partnerships with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The deals that are displayed on this website are provided by companies who pay us. This compensation can affect the way and when products are featured on this website, for example such things as the order in which they may appear within the listing categories in the event that they are not permitted by law. This applies to our mortgage, home equity and other home loan products. But this compensation does have no impact on the content we publish or the reviews you see on this site. We do not contain the universe of companies or financial offers that may be open 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 distinct methods of getting an initial review of your auto financing options. Prequalification is not as rigorous and only requires sharing the most basic details regarding your financial situation and offers estimates of what rate and terms you may be eligible for. Preapproval requires you to share more of your financial and personal details with a lender, since it's essentially an application that is only partial. Prequalification is different from preapproval A is that it is a formal offer from an lender, with conditions, and is an estimate of the type of is the car loan terms you might qualify for. Because a prequalification is not firm, it's not much use when negotiating at the dealership. However, regardless of whether you choose a car loan prequalification or preapproval neither are guaranteed offers -the final approval of your loan will be contingent on the lender's underwriting department finding no surprise in your complete credit report and other factors such as income and employment verification. Advantages of preapproval and prequalification for auto loan Preapproval as well as prequalification both preapproval and prequalification let you get a good grasp on how much money you could borrow, and how much you'll have to pay for it. Benefits of preapproval With preapproval, you can shop with confidence knowing that you will most likely pay the exact or identical interest rate. You could also make use of your preapproval rate an indication to the dealership once you enter the finance department, placing the dealership under pressure to beat that rate. Benefits of prequalification a low-risk option to discover the type of loan you could get even if you're not ready to start shopping for a loan in the first place. Credit scores aren't affected since the lender will not conduct a thorough credit check. What to keep in mind regarding auto loan prequalification and preapproval When you prequalify for an auto loan, you get an estimate of the loan amount and rate you'll be offered. This information to search for the most competitive rate however, be aware that prequalification does not constitute the same as an offer that is officially made. Rates aren't guaranteed and their validity is dependent on how exact the information you provide is. Preapprovals aren't a guarantee either. If your income, job or credit significantly change between the time you're preapproved and when you fully apply, you could be denied the loan. Keep this in mind while shopping and be cautious about your spending -- particularly with credit cards. How do you be preapproved for a car loan If you decide that is right for you, then you'll have to collect the required documents and then submit a preapproval application. It is advised to look into reputable lenders prior to applying. After you've been approved by a lender, you'll be aware of what you can pay and will have control when it comes time to bargain. Preapproved auto loans generally last for between 30 and 60 days. If you're in the preapproval phase, there are a few actions you can take. Review your application to find any mistakes, increase your down payment, lower the total amount of debt you have or consider a different lender. Before attempting to work with a different lender be sure to be sure to discuss the reasons of the rejection with the lender you made an application with. Information you need to provide to prequalify or be preapproved Preapproval and prequalification require certain information. Make sure you provide the following information personal information such as your name, address and telephone number. Financial information, such as your income and your housing payment. Details about the loan, including how much you want to take out. Preapproval is likely to require you to submit more information, including the Social Security number and birthdate so that the lender can pull your full credit report. This is referred to as a hard credit pull, and will temporarily lower your credit score by some points. In the end, prequalification and preapproval are both useful instruments for understanding the amount you can spend on your auto loan. Preapproval could even allow you to find a lower rate on the dealer if you're thinking about financing it. However, these offers aren't guaranteed, so you should spend wisely while you're shopping. Find out 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 team.



Editor: Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate from late 2021. They are committed to helping readers gain confidence to control their finances through providing concise, well-studied facts that break down otherwise complicated topics into bite-sized pieces.






Auto loans editor


Reviewed by Mark Kantrowtiz Reviewed by Nationally recognized student financial aid expert

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






Nationally recognized student financial aid expert




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