What Does It Mean to Be Prequalified or Preapproved for an Auto Loan?

by Julia Guardione Updated on: November 25, 2019

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.

Compare Auto Refinance Rates
No impact to credit score.
Shop For Rates Now

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!

About The Author

Julia Guardione

Julia Guardione is an auto refinance writer based in Austin, Texas. She is a graduate of Texas State University and a lover of all things outdoors.

Read More

by Daniel Mattia

How to Check Your Credit Report for Free

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…

by Cristy S. Lynch

Car Loan Upside Down? 5 Options When You’ve Got Negative Equity

You owe more on your auto loan than the value of the car itself. Now what? That new car smell, fancy leather seats, blind spot cameras… there’s a lot to love about getting a new set of wheels. Except, perhaps, the price tag. According to Kelley Blue Book ‘s…

by Stephanie Colestock

Refinancing Your Auto Loan When You’re Self-Employed

It can be a bit tricky to refinance an auto loan when you work for yourself. Many Americans today are enjoying the benefits and freedom that self-employment can bring. The Pew Research Center reports about 16 million Americans work for themselves -- that’s 10% of all jobs held in…

review review

Customer Reviews

Read our 11348 Certified Reviews


apply now apply now

Apply Now

Lower your interest rate and drop monthly payments by an average of $76*/month!