A car purchase is a major financial purchase that most individuals make. Upgrading, riding, or even buying your first car<\/a> can be an enjoyable thing, but it can also be very intimidating. Prequalification of a car loan and a shop visit is one of the wisest things to do before visiting a dealer. It not only provides you with clarity and control, but it can even save you thousands of dollars throughout the life of your loan.<\/p>\n The following guide will dissect the definitions, processes, and benefits of prequalification, making it a potent asset to the armory of anyone venturing into the car industry.<\/p>\n Prequalifying for a car loan involves asking a lender to give you an estimate of the amount that they believe you could be approved to borrow, the interest rate that they would charge you, and your monthly payments, without a hard credit check. It is a pre-exception treatment that provides you with a snapshot of your purchasing potential.<\/p>\n One should not confuse\u00a0prequalification\u00a0and\u00a0preapproval:<\/p>\n They are both helpful, yet prequalification is the best place to start\u2014at least, when you are still comparing.<\/p>\n Here\u2019s how prequalifying can lead to serious savings:<\/p>\n 1.\u00a0Stronger Negotiating Power<\/strong><\/p>\n When you walk into a dealership with a prequalified loan offer<\/a>, you\u2019re no longer at the mercy of dealer financing. You will be able to match rates and terms and, what is more, use your pre-qualification as leverage to bargain for better terms.<\/p>\n 2.\u00a0Avoiding Dealer Markups<\/strong><\/p>\n A dealer may mark up most of the rates on loans available in dealer finance. By merely having a prequalified offer with a bank or credit union, you can avoid these little-hidden charges and having a more competitive rate.<\/p>\n 3.\u00a0Protecting Your Credit Score<\/strong><\/p>\n Rate shopping can result in several hard inquiries that potentially can decrease your credit score. Prequalification involves soft inquiries, so you can find out options without making an inquiry to harm your credit.<\/p>\n 4.\u00a0Preventing Overbuying<\/strong><\/p>\n It helps you not spend things you cannot afford by knowing your budget first. You\u2019ll find less temptation with upsells and will concentrate on the car that fits financially in your budget.<\/p>\n Getting prequalified is easier than you might think. Here\u2019s how to do it:<\/p>\n Does prequalifying guarantee loan approval?<\/strong> Will prequalifying affect my credit score?<\/strong> Can I still negotiate with the dealer?<\/strong>What Does It Mean to Prequalify for a Car Loan?<\/h2>\n
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Why Prequalifying Can Save You Thousands<\/h2>\n
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<\/figure>\nHow to Prequalify: Step-by-Step<\/h2>\n
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Common Questions Answered<\/h2>\n
No, it is guesswork. Your credit is checked fully against approval, and your financial details are verified.<\/p>\n
No. The soft credit inquiry is done during prequalification and will not cause you to reduce your credit score.<\/p>\n
Absolutely. As a matter of fact, a prequalified offer will ensure you have higher bargaining power and confidence in the negotiations.<\/p>\n