Learn the differences between prequalification, preapproval, and approval.
Are you prequalified for a car loan? If you are, that is a good thing. It means that a lender or financial institution believes you are a good candidate for a car loan based on the information they have on you. However, prequalification is not the same as approval for a car loan.
Car loan shoppers are sometimes confused by the terms prequalification, preapproval, and approval. Each has a different meaning and serves a different purpose in the car buying process.
Let’s look at each term.
If a lender prequalifies you for a loan, it is telling you that you appear to be good candidate for a loan based on some basic information it has on you or that you supplied to it, such as your debts, income, or credit score. However, a lender cannot approve you for a loan before you apply for one, so even if you are prequalified, you still need to apply for a loan in order to get one. Moreover, applying for a loan with a prequalification offers no guarantee that you will receive an approval.
If a lender preapproves you for a car loan, it has not committed to giving you a loan. It has thoroughly considered your financial background and capacity to pay a loan and tentatively decided how much it will likely lend to you under certain loan terms if you apply. Usually, a person seeks a car loan preapproval before he/she knows which car he/she wants to
Most people seek preapprovals before they know which cars they would like to purchase because you can take a preapproval for a car loan to a seller as proof of your ability to obtain financing and even use it as a bargaining chip when negotiating your purchase. However, even with preapproval you need to apply for a loan in order to finance your car purchase. Like with prequalification, preapproval is no guarantee that your actual loan will match the one quoted under the preapproval (or even that your lender will approve your application).
Approval for a loan is exactly what it sounds like. If you apply for a car loan with a lender and it approves your application, then all you have to do is sign your car loan paperwork within the allotted timeframe to get your car loan.
Every car loan is unique, which is why only approval for a car loan guarantees your ability to finance your purchase. Prequalification and preapproval serve as indicators of your ability to get a loan, with preapproval being the more concrete of the two pre-application evaluations. Still, a car loan prequalification is a good sign that you may be able to get a car loan.
At Innovative Funding Services (IFS), we understand that you want the car financing process to be straightforward. We specialize in car loan refinance, leased vehicle buyouts, and company car purchases. If you need help with any of these transactions, apply with us, and we will assign a dedicated Finance Advisor to you who will take the time to listen to your story and answer all your questions about financing or refinancing your car. Your advisor will work to match you with a car loan that meets your needs from one of our 25+ national lenders.
Is auto loan refinancing right for you?
Car loan refinancing may help you lower your monthly payments, decrease your interest rate, or remove someone from your loan. See how much you may be able to save with our auto refinance calculator.
We offer up to 100% financing for those with credit scores of 525-850. Apply to refinance through IFS today.