A lot of borrowers assume that they are guaranteed the car loan quote they receive when they first speak with a lender. However, this is not always true. Your quote can change depending on whether you re pre-approved or pre-qualified. This article explains the difference between those terms:
When you are pre-qualified for a loan, it means that, from the information you ve submitted to the lender, you seem to fit the qualifications for that loan. Being pre-qualified is very general; it usually doesn t even require a credit check or proof of income. You answer some basic questions about your income and credit standing, and the loan company determines what loan is right for you based on your answers. Being pre-qualified does not secure your loan quote. In fact, it s likely that your quote will change when the lender pulls your credit report.
If you re pre-approved for your loan, it means that you ve taken every step of the loan process other than selecting a car and signing the contracts. Pre-approval quotes are generally guaranteed for a set amount of time -- usually 30 days. To get pre-approved for a car loan, the company will need to pull your credit report and receive proof of your income. However, once your lender has pre-approved your loan, you simply have to find a car. The lender will consider certain things about the car you choose, such as its value. They will then send you the contracts, you fill them out, and you own your car.
Most borrowers get pre-qualified for a loan when they are still comparing lenders. If you ve decided on a lender, there is no reason not to go ahead and get pre-approved. This may even get you a better interest rate if interest rates rise before you make your purchase.
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