While pre-qualified and pre-approved seem very similar, they play very different roles in helping you get a car loan. We study the differences so that you can move forward with confidence towards your next car!
Pre-approved auto loans
Pre-approved auto loans come from direct lenders such as banks, credit unions, and online lenders. They basically turn you into a cash buyer at the dealership. When you visit the lender, you are approved for a certain amount of money, which is given to you in the form of a check, or sent directly to the dealer when you complete your purchase.
These loans are generally given to people with good credit. And, because they are based on credit score, your interest rate may even be a little lower than on other loans. Once you are pre-approved, you can go to the dealership of your choice and shop like any other traditional buyer.
If you can get pre-approved, you can also use it to negotiate a lower rate or better deal on a car loan through a dealership’s captive lenders. Lenders that the dealership is registered with may offer you a lower interest rate if you choose to finance with them instead. Corn, get pre-approved for a direct loan is not for everyone.
If you have bad credit, it may not be possible to get pre-approved from a direct lender as they tend to have higher credit score requirements. However, you may still be able to pre-qualify with a dealer who has loan resources to work with people in unique credit situations.
Prequalified auto loans
Traditional borrowers with good credit who do not get pre-approved can start purchasing a vehicle and financing with the dealership. These buyers typically choose a car and then talk to the CFO, who sets up a loan through their lenders. Once the administrative formalities have been completed, they can take delivery of their vehicle.
With bad credit, however, the process is reversed. You first get your financing and then choose a car from the dealership’s inventory that is within the maximum monthly payment range given by the lender. This is where a pre-qualification comes in.
When you are pre-qualified for an auto loan, you are matched with a dealer based on specific requirements. Not all dealers and lenders can work with borrowers who have less than perfect credit. By using prequalification, however, you can reduce your chances of finding the right lender and having your credit score over and over again.
Prequalification begins with an application for financing that saves dealers and lenders time by getting the process started right from the start. When you are struggling with bad credit, it is important that you take care not to have your credit score withdrawn several times over weeks or months. Each hard blow typically rings your credit score around five to 15 points.
If you are pre-qualified, you are matched with a dealer based on the information you provide. Getting matched with the right dealership registered with the right lenders makes all the difference when looking for auto loan approval.
Visit to a car dealership
When you are matched with a dealership through prequalification, you need to be ready for the process from the start. The dealership’s financial manager acts as an intermediary between you and the lender, verifying your qualifications and documents.
Since lenders who work with bad credit know you’re more than just a credit score, they ask for proof of income, residency, and employment, and other factors to determine your loan approval. automobile. They make sure that you have the capacity, the stability and the willingness to take out a car loan.
Lender requirements vary, but subprime lenders who deal with bad credit borrowers typically require similar documents. These usually include your most recent computer-generated check stubs, a utility bill or bank statement in your name, and proof of a landline or cell phone under contract.
You are also usually required to provide a valid driver’s license, a list of five to eight personal references, and a down payment of at least $ 1,000 or 10% of the vehicle’s selling price.
If you need to find your next car, it’s a good idea to check your credit score first. Once you know where you are at, you can decide if a pre-approval or a pre-qualification is the way for you. Getting pre-approved might not be an option for everyone, but that doesn’t mean the others aren’t there.
If you’re struggling to get a lower score, you can improve your chances of getting the car loan you need by pre-qualifying for a local dealership. TO Auto Express Credit, we’ve connected consumers with dealers who have been able to help them for over 20 years. You can start now by filling out our quick, free and no-obligation form car loan application form.