Should I Get Pre-Qualified or Pre-Approved for a Car Loan?

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Even with poor credit.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - December 10, 2020

Whether you should get pre-qualified or pre-approved for an auto loan comes down to your credit situation. A pre-qualification can help you take out the stress of searching for a car loan when you have bad credit. A pre-approval is a great way to go for an auto loan, but it may not be easy to come by with poor credit. Let's take a look.

Pre-Qualifying for a Car Loan

Typically, when you get pre-qualified for a car loan, you're matched to a dealership that's signed up with lenders that can assist people in specific credit situations. A pre-qualification is a great way to save time, money, and your credit score from taking any unnecessary hits.

This is a great avenue for borrowers whose credit is already bruised or bad – anyone with a credit score below around 660 usually falls into this category. With a pre-qualification, you cut your chances of running into the wrong lenders and having your credit score hit multiple times. It's important that your credit score isn't pulled multiple times over a long period of time, each hard pull can ding your credit around five and15 points on average.

A pre-qualification begins with a request for financing that saves dealers and lenders time by getting the process started up front. When you're struggling with poor credit, lenders use other factors to consider you for financing, so you have to be prepared to meet some requirements. These lenders are called subprime lenders, and the process of getting an auto loan through one might not be what you expect.

Rather than going to a dealership, choosing a vehicle, and then finding financing (which is what a good credit borrower might do), the process is reversed. You work with a special finance dealer to get financing, and then you choose a car that fits into your loan amount from dealership stock.

Getting Pre-Approved With a Direct Lender

Unlike a pre-qualification, a pre-approval is given to you by a financial institution such as a bank, credit union, or online lender. A pre-approval turns you into a cash buyer at the dealer, and you can choose any vehicle you want as long as it's within your pre-approved loan amount. You're sometimes given the check for the pre-approved amount, while other times the check is delivered directly to the dealership.

When you get pre-approved, you know how much you can spend, and what your interest rate is ahead of time. Knowing this actually gives you a bargaining chip to try and negotiate an auto loan contract with lower rates or terms through the dealer’s lenders.

A pre-approval is typically reserved for borrowers with good credit, so it can be more difficult to qualify for with a low credit score. If your credit is struggling, you may still have a shot if you're a member in good standing at a credit union. They typically pass savings on to their members since they're not-for-profit organizations. If you're not having luck getting a pre-approval, getting pre-qualified is still an option.

Visiting Your Pre-Qualified Dealer

When you're pre-qualified, you're matched to a local special finance dealership that’s signed up with subprime lenders. Since they don't base your car loan approval just on credit score, they need proof that you have the ability, stability, and willingness to take on an auto loan.

The documentation needed can vary, but subprime lenders generally require you to provide:

  • Proof of income – Recent computer-generated check stubs showing year-to-date income of around $1,500 to $2,500 from a single source.
  • Proof of residence – A utility bill in your name, at your current residence, or a bank statement showing that same address.
  • Proof of a working telephone – A phone bill in your name for a landline or contract cell phone service. Prepaid phones aren't accepted.
  • Proof of identification – A valid driver's license with the same address as your application. Can't be revoked, suspended, or expired.
  • Personal references – A list of five to eight personal references complete with names, addresses, phone numbers, and email addresses. These can be anyone you know, as long as they don't live at your address.
  • Down payment – Most subprime lenders require a down payment of at least $1,000 or 10% of the vehicle's selling price, sometimes whichever is less.

Get Started on Your Next Auto Loan Right Now!

Whether you should get pre-qualified or pre-approved for a car loan is really up to you, but if you're struggling with credit issues, a pre-qualification is often the key to saving yourself a lot of stress. If you have bad credit, getting pre-qualified through CarsDirect can improve your chances of getting the auto loan you need.

We've been connecting consumers to the dealers that can help for over 20 years. You can get the process started right now by filling out our quick and easy car loan request form.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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