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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 offering interactive tools and financial calculators, publishing original and objective content. We also allow you to conduct research and compare data for free to help you make informed financial decisions. Bankrate has partnerships with issuers, including but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that are advertised on this site come from companies that compensate us. This compensation could affect how and when products appear on this website, for example, for example, the order in which they may appear within the listing categories, except where prohibited by law. Our mortgage or home equity products, as well as other products for home loans. This compensation, however, does affect the content we publish or the reviews appear on this website. We do not contain the entire universe of businesses or financial deals that could be accessible to you.



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3 min read Published November 02, 2022.
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Mark Kantrowitz is an expert on student financial aid, the FAFSA as well as scholarships, 529 plans as well as tax benefits for education and student loans.









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Prequalification and preapproval are two distinct methods to get an early review of your options when it comes to financing for your vehicle. Prequalification is less rigorous and only requires sharing basic information regarding your financial situation and gives you an estimate of the rate and terms you might qualify for. Preapproval requires sharing more personal and financial information with a creditor, as it is essentially an incomplete application. The difference between prequalification and preapproval A is that it is a formal invitation from an lender, with conditions, and provides an estimate of the type of is the car loan terms you could be eligible for. Since prequalifications aren't an official offer, it's of no useful when you're negotiating with the dealership. However, regardless of whether you choose an auto loan preapproval or prequalification neither of them are guaranteed offers- final approval will depend 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 preapproval and prequalification for auto loan the preapproval and prequalification allow you to get an idea of much money you could get, as well as the cost you'll have to pay for it. Advantages of preapproval When you have preapproved, you can shop with confidence, being confident that you'll likely receive the same or a identical interest rate. You could also use your preapproval rate as an argument with the dealership when you go to the financing office, putting pressure on them to beat that rate. Prequalification benefits an easy option to discover the kind of loan you could get particularly if you're not yet ready to shop in earnest. Your credit score isn't impacted because the lender won't run a hard credit test. Things to consider with prequalification for auto loan prequalification and preapproval If you are prequalified for an auto loan and get an approximate estimate of the loan amount and interest rate you will be offered. Then, you can use this information to compare prices to find the best rate however, keep in mind that prequalification is not an actual offer. Rates cannot be guaranteed and their validity is dependent on how exact the information you give is. Preapprovals also aren't guaranteed. If your earnings, employment or credit drastically change between when you are preapproved and the time you apply, you could be denied the loan. Keep this in mind while shopping and be cautious about your spending -- especially with credit cards. How to be preapproved for the car loan If you decide that a car loan is right for you, you'll need to gather the necessary documents and fill out an application for preapproval. It is advised to investigate several lenders that are reputable prior to making an application. Once you have been preapproved by a lender, you'll have a clear idea of how much you can spend and will be in control when it comes time to negotiate. Preapproved auto loans are typically valid for 30 to 60 days. If you're in the preapproval phase, there are a few actions you can take. Check your application for mistakes, increase your down payment, reduce your total debt, or even try a different lender. Before you try a new lender, however, talk about the reason of the rejection with the lender you made an application to. Details you will need in order to prequalify or get preapproved Preapproval and prequalification need certain information. Prepare to supply the following information: Personal information, like your address, name, and phone number. Financial information, such as your income and your housing payment. Details about the loan which includes 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 so the lender can pull your full credit report. This is known as a hard credit pull, and can temporarily lower your credit score by a few points. The bottom line Prequalification and preapproval are two useful instruments for understanding the amount you can spend on your auto loan. Preapproval could even allow you to obtain a better deal on the dealer if you're contemplating financing with it. However, these offers can't be guaranteed, so choose carefully when you shop. Learn more


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Written by

This article was generated using automation technology and thoroughly checked for accuracy and editing by an editor from our editorial team.



Edited by Rhys Subitch Edited by Auto loans editor

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






Auto loans editor


Reviewed by Mark Kantrowtziz Reviewed by Nationally acknowledged expert on student financial aid

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






Nationally recognized student financial aid expert




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