Think of your credit report as a physical for your financial health -- except it's free. When you see your doctor for your annual physical, you’re told what you’re doing right and what needs improvement. The results of your physical give you insight into your overall health so you…
Have you ever received a letter in the mail that says you are prequalified for a new or used auto loan and thought that it meant you were approved and ready to start car shopping? We have all received these letters at some point in our lives, so it is important to know what this means and what steps should be taken to have your loan application completed.
What Is a Prequalification?
Prequalification is the possibility of approval given a set of unverified information. Auto loan prequalification is not a full analysis of your credit report. Instead, it is an assumption that based on information provided regarding your approximate credit score and income, you could meet lending guidelines.
There is no hard inquiry on your credit for a prequalification. Therefore, if you want to apply for a loan your approval will be required to run your credit and establish creditworthiness. Use our Auto Payment Saver to see what rates you might qualify for with no impact to your credit score.
What Is a Preapproval?
A preapproval is the most accurate at establishing your credit worthiness. The lender will analyze the information you provide regarding your income, residency, and your credit history according to your credit report. There will be a hard inquiry on your credit for a preapproval and your consent is necessary.
Many times, a preapproval letter that you can take to a dealership will be provided if the financial institution has indeed reviewed and approved your credit report.
A preapproval may fall through if, for example, the car you wish to purchase is actually worth less than the loan amount requested. It is important to talk to your lender while you are shopping for a car to ensure you are purchasing a car that is priced relative to its value.
Remember, neither a prequalification or a preapproval is a guaranteed loan offer.
If you are not in the market for a new vehicle, but would like to lower the payment on your current vehicle, RateGenius can help you! Just complete your application and you will be on your way to saving money!