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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 better financial choices by providing you with interactive financial calculators and tools as well as publishing original and impartial content. We also allow users to conduct research and compare data at no cost and help you make informed financial decisions. Bankrate has partnerships with issuers such as, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make money The products that are advertised on this site are from companies that compensate us. This compensation can affect the way and where products appear on this site, including, for example, the order in which they be listed within the categories of listing and other categories, unless prohibited by law for 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 offerings 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 review of the options for financing your car. Prequalification is less rigorous and only requires sharing the most basic details about your financial status, and offers an estimate of the rates and terms you might qualify for. Preapproval requires sharing more financial and personal information with a lender since it’s essentially a partial application. The difference between prequalification and preapproval A is a formal request from an lender, with conditions, and provides an estimate of what is the car loan terms you might qualify for. Since a prequalification isn’t binding, it’s not of much use when negotiating at a dealership. It doesn’t matter if you go with an auto loan prequalification or preapproval neither are guaranteed offers -the final approval is contingent on the underwriting department of the lender making sure there are no surprises in your full credit report and other factors like income and employment verification. Advantages of preapproval and prequalification for auto loan the preapproval as well as prequalification let you get an idea of much money you can feasibly borrow, and how much you will pay to borrow it. Preapproval benefits: With preapproval allows you to shop with confidence being confident that you’ll likely get the same or a similar interest rate. You can also utilize your preapproval as a point of with the dealership once you enter the finance office, and put the dealership under pressure to beat that rate. Benefits of prequalification an effective way to find out the kind of loan you can get, especially if you aren’t yet ready to shop in earnest. Your credit score won’t be affected because the lender won’t run a hard credit test. What to keep in mind regarding prequalification for auto loan prequalification and preapproval When you apply for a prequalification for an auto loan you will receive a rough estimate of what loan amount and interest rate you will be offered. This information to compare prices to find the most competitive rate, but be aware that prequalification does not constitute an actual offer. Rates aren’t guaranteed and their legitimacy is contingent on how accurate the information you provide is. Preapprovals also aren’t guaranteed. If your income, job or credit score drastically fluctuate between the time you’re preapproved and when you fully apply, you may be rejected the loan. Remember this when shopping, and be mindful when you spend money — especially with credit cards. How do you get preapproved for a car loan If you decide that is right for you, you’ll be required to gather all the documents and then submit an application for preapproval. It is suggested that you investigate several lenders that are reputable prior to making an application. After you’ve been approved by a lender, you’ll be aware of what you can spend and have control when it’s time to bargain. Preapproved car loans are usually valid for 30 to 60 days. If you’re in the preapproval phase you have a few steps you can follow. Check your application for mistakes, increase your down payment, lower your total debt, or even try another lender. Before you try a new lender, however, talk about the reason for the denial with the lender you made an application with. Information you need to provide to prequalify or be preapproved Preapproval and prequalification both require some of the same details. Make sure you provide the following information the following information: Personal information, such as your address, name, and telephone number. Financial information, such as your income and your housing payment. Information regarding the loan, including how much you’d like to take out. Preapproval is likely to require more details, such as your Social Security number and birthdate to ensure that the lender will be able to pull your complete credit report. This is known as a hard credit pull, and will temporarily lower your credit score by a few points. The bottom line Prequalification and preapproval are two useful tools for knowing how much you could pay for the auto loan. Preapproval could even allow you to get a better rate at the dealership if you’re thinking about financing it. However, the deals aren’t guaranteed, so spend wisely while you’re shopping. Find out more

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Written by

This article was written using automation technology and thoroughly edited and fact-checked by an editor from 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 committed to helping readers gain the confidence to control their finances through providing precise, well-researched and accurate data that breaks otherwise complicated subjects into digestible 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, 529 plans, scholarships educational tax benefits, student loans.

Nationally recognized student financial aid expert

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