Finally, you have made it to the position where you can buy a car and are ready to apply for an auto loan. While going through the process, you may come across the option, of auto loan prequalification, which you should consider. If you are getting prequalified for an auto loan, it doesn’t necessarily mean you are approved for financing, rather you can use this as an option to check in different types of loans, and select as per your eligibility.
Quoting the importance of positivity and qualification, “Positive attitudes qualify you for positive experiences”.
What is Auto Loan pre qualification?
Auto loan pre qualification is a way to get a basic idea of what a loan actually is, and how it is going to be in the future course for you. Auto loan lenders give you an estimation of how much they can loan you, what are the loan terms etc. This information is based on your financial competence and doesn’t guarantee a loan where you have to apply for the same separately.
Besides, it can be a way to practice for your actual application where you have to provide your personal and financial information. Once you go through the pre-qualifying process, you can get an idea about interest rates you might receive that can only help you to get approved for an auto loan.
Auto Loan pre-approval and pre-qualification
It might be at the back of your mind, is there any difference between auto loan pre approval and auto loan prequalification?
You may have heard these terms used interchangeably on different lending platforms as they depend on the creditor and the type of loan one may be applying for. When it comes to the pre-qualification for an auto loan, here you can get an estimate for the financing you are applying for that is provided by your lender, which is based on your financial input.
Pre-approval for an auto loan is given by a lender as conditional approval which can help you to finance the purchase of your car. Pre-approval may require more personal and financial information, which means getting approved indicates your credibility better than getting pre-qualified.
Does auto loan pre-qualification affects your credit score
Credit scores are considered important while lending an auto loan, as they validate a borrower’s reliability based on his payment history. Hard inquiries can have an impact on your credit score, and they generally occur when a lender checks your credit while approving a loan. When it comes to auto loan pre qualification, it is considered a soft inquiry that doesn’t hurt the credit score.
Besides, it can be used as a tool to increase your chances of getting approved for a credit card. During pre-qualification, you can also fill out the form online along with uploading supporting documents. After some time, the lender will verify your information and give the results, whereupon if qualified, you can review the procedure and offers with which you can proceed for an auto loan.
Is it worth applying for auto loan pre qualification?
There are many benefits adhered to getting pre-qualified for an auto loan, such as:
- Getting an idea about your budget: Getting prequalified helps you to find out the cars you can afford inclusive of the auto loan payment and interest you have to pay. Just, for example, the average interest rate a Canadian pay is 6.62%, whereas you can get the best interest rates through pre-qualification. Imagine picking up a car for an auto loan, and not making it due to budget fallout.
- Information about your credit: When you get prequalified, you get an idea about your credit score which can help you in the approval of your auto loan.
- Minimizing dealer profits: Once you are prequalified for an auto loan, it becomes difficult for a dealer to add any extras to your purchase, such as special services, which include dealer profits.
Benefits of Car loan pre-approval
Getting pre approved car loan has some pros, such as:
- You get an idea about how much you can borrow, and where you can prepare a realistic budget.
- You can get an idea about the best interest rates in Canada, and loan terms
- You can focus on a car as you know how much you have to spend
- Have greater negotiating power where pre-approvals from multiple trusted lenders can get you the best offers
Applying for auto loan pre-qualification and Auto loan pre-approval
Getting pre-qualified is almost similar to car loan pre approval for which you can apply through any bank or financial institution. Lenders will ask about your personal information and they will carry on a soft credit inquiry. When it comes to personal take, you will be asked to submit information related to income, employment, identity, and current debt obligations.
It will be better if you are ready with your social security number, driver’s license, proof of income, and housing payments. After this, the verification process will begin and you can get prequalified for an auto loan.
Conclusion
You can try to pre-qualify for an auto loan to get through the process and know about the auto loan process which you are applying for. This step is important as it can help you set expectations once you are buying a car, along with determining your credit. You can also skip some dealership lending where you can have an upper hand while negotiating with the lenders.
FAQs
Does pre-approvals hurt credit score?
Inquiries for pre-approvals usually don’t affect your credit score, unless you apply for the credit and follow through. The initial inquiry for a pre approved car loan isn’t a hard one, so your credit score remains unaffected until you decide to apply for it, whereupon it becomes a hard check and affects your credit score.
What does pre-qualified mean for a car?
Getting pre-qualified for a car loan means you have an idea about the estimation that you will be provided for the loan, along with the interest rates and deals. It also means that you are likely to receive a loan at a rate based on your financial information, as you have gone through the preliminary check.
What is better: Pre-qualified or pre-approved?
When it comes to pre-qualification, it is a faster process and requires fewer details which should be done at the beginning of your loan application to know about the rates. When it comes to the pre-approval process, it is comparatively a longer one and requires comprehensive details, which is better once you have finalized the loan amount.
Is it better to pre-qualify for a Car Loan?
Pre-qualification for an auto loan is always recommended as it enables you to compare several rates from multiple auto lenders. It can increase your chances to get approved for car loans.. Besides, you can come across different terms and conditions, where you can choose as per your budget and comfort scale.
Can you be denied a Car Loan after Pre-approval?
Getting pre-approved doesn’t guarantee your loan approval, which means there are chances that you may be denied a car loan even after the pre-approval process. There may be some inconsistencies in the details, application, credit score, etc, which may result in the denial of your auto loan from the lender.
