Prequalification for a car loan is great! Be careful though, because this does not mean you are preapproved. The lingo can get pretty confusing when it comes to car loans. The team at Chevrolet of Spartanburg is here to answer all your financing questions. We are going over what it means to be prequalified, why you should try to be prequalified and the difference between prequalification and preapproval.
In the most basic sense, prequalification 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. The information they take into consideration includes income, debt, assets, and money available for down payment.
Benefits of Being Prequalified for a Car Loan
Why should you get prequalified for a car loan? While prequalifying for a loan doesn’t necessarily mean you will be able to buy the car of your dreams, it does mean two things: you will quickly know the sticker price you can afford to buy or lease and you can confidently walk into a dealership with your prequalification letter. When you get prequalified, you can request a letting stating how much you may be able to borrow, based on the information you provided to the bank. You can show this letter to the sales associate to show that you are seriously interested in purchasing a new vehicle.
Two additional benefits of getting prequalified before applying for a car loan include no commitment from you or your bank, and credit history is not a factor. No commitment means, you and the bank are not committing to a loan. So, whether you don’t agree with the number to bank suggests or you decide against buying a car for the time being, there is no commitment. If you’re worried about your credit score, getting prequalified could help you ease your nerves, it isn’t true application and your credit history doesn’t factor into your prequalification.
Prequalification vs. Preapproval
Getting preapproved is more concrete than getting prequalified, even though neither of them guarantee you will actually receive a car loan. One main difference between the two is that with a preapproval, lenders will consider your credit score and with prequalification they will not. What is typically missing from a preapproval application is the actual asset (car) that the potential borrower wishes to purchase.
As with prequalification, preapproval is not a guarantee. However, a person usually obtains a preapproval before they find the car they are looking to purchase so that they can use their projected loan as a bargaining chip when negotiating your purchase. With preapproval, you will have to supply the lender with more documentation than you did for prequalification so they can perform an extensive check on your financial background and current credit rating.
Schedule a Test Drive at Chevy Spartanburg Today!
The team at Chevrolet of Spartanburg strives to help everyone purchase a vehicle they enjoy. Whether it is new or pre-owned, our experienced team will find the right car for you! We are conveniently located near interstates 85 and 26, so if you’re traveling from Hendersonville, Ashville, Charlotte, or Greenville you can you easily shop with us. Start your car search today. Browse our online inventory or give us a call at (864) 641-6345 to schedule your test drive today!