How Does Auto Loan Preapproval & Prequalification Work?
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Editor’s note: At Lantern, we strive to help you make financial decisions with confidence. To do this, we occasionally feature content that includes information about our partners and their products or services. We do not provide, endorse, or guarantee any third-party product, service, information or recommendations—and our opinions are our own.
What Does Preapproval Mean?
What Does Prequalifying for a Car Loan Mean?
What Are the Benefits of Getting Preapproved?
It Can Reduce Purchasing Guesswork
It May Create Negotiating Power
It Can Help You Avoid Upsells
How Do You Get Preapproved for a Car Loan?
1. Estimate Your Budget
2. Review Your Credit Report
3. Gather Information About Your Ability to Pay
Proof of employment status W2s and any other income verification information Social security number I identifying documents, such as driver’s license, military ID, state ID, or passport Proof of assets
4. Review Loan Preapproval Terms
Loan amount. This is the total amount you can borrow. You can generally take out less money, if you so choose, since this may be more than you want to take out or may require higher monthly payments than you can make. Loan term: This is how long you will be paying the loan back. Interest rate and APR: This will let you know how much the loan is costing you. Monthly payments: This is how much you will have to pay the lender back each month.
5. Shop Around For the Best Loan Offer
6. Hit the Dealership Floor
What Are the Benefits of Getting Prequalified?
You Get a Take on What You Qualify for
It Gives You a Sense of Your Budget Limits
How Do You Get Prequalified?
1. Determine Your Budget
2. Gather Information for Lenders
3. Pay Close Attention to the Loan Terms
Loan amount: How much you can borrow from the lender Loan term: How long you’ll have to repay the loan Interest rate and APR: How much you’ll pay the lender to finance the loan each month, and what fees and other costs might be involved Monthly payments: Your minimum monthly payment over the loan’s lifespan.
Preapproval vs. Prequalification
Frequently Asked Questions
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