What Does Pre-Qualification Mean For Auto Loans?

Middle aged woman being handing the keys to a new car she financed in Neptune, NJ.

Pre-qualification can assist you in determining whether you could get an auto loan approval or not. The process can help you to get an estimation rate while shopping for a vehicle.

However, if you are pre-qualified for a loan, it does not signify that your car loan will be automatically approved. You have to still fill up the formal loan application so that the lender can review it.

Thus, pre-qualification can offer a proper idea about the odds of your car financing approval. You will also get to know about the estimated loan terms once your final loan application is submitted.

If you are pre-qualified, it also signifies working with one of the lenders. In case you are working with any loan officer, it can aid in forging a relationship. It can make the entire buying process smoother after you find a new car.

However, there is no compulsion for you to be working with a single lender for the process of pre-qualification. You will take a smart step if you compare different interest rates. It will also help to know the terms of the loan that different lenders are ready to provide you so that you get the most lucrative deal.

It is important to understand though that getting prequalified is not the same as being pre-approved. As such, you should comprehend the distinction between them.

Distinctions between pre-approval and pre-qualification

Pre-approval, as well as, pre-qualification can both give an idea of the estimated loan terms. They also help you to know whether a lender will approve your car loan or not. However, strictly speaking, pre-approval frequently refers to a hard credit inquiry by the lender while pre-qualification refers to a soft credit inquiry.

Pre-qualification does not assure a vehicle loan 

You should understand that being pre-qualified does not assure your approval for a car loan. It is still essential that the lender gives you the final approval. Your attention should be on the terms of the loan before signing the agreement.

Merits of pre-qualifying for a vehicle loan

Being pre-qualified for a vehicle loan has several advantages. Check out some major ones below:

  1. You can skip dealership financing - After you select a vehicle and negotiate the cost, you do not have to get your loan approved from the dealership. A loan from a dealership could be more expensive than taking it from the lender. In case you make up your mind to apply for the loan from a lender, your dealer can contact them and make final arrangements.
  2. Have an idea of the estimated budget even before the actual shopping - Choosing your dream car and then finding out that it is beyond your purchasing power can be as disillusioning as getting refused a car loan. When you have a fair idea of the amount you can borrow, it becomes easier to focus on vehicles that you can afford.
  3. You can know your credit score in advance - It would not be easy to select a new four-wheeler and then not getting the loan sanction just because you had low credit scores. When you are pre-qualified, you can get an idea of whether your loan will be approved or not. However, you still have to submit your loan form to know it has been approved or not.

If you wish to know more about pre-approval or pre-qualification, contact Sansone Jr's NJ Auto Lending for all your queries in Neptune, NJ. This dealership also serves customers from Freehold, West Freehold, and Lakewood.