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Preapproval vs. Prequalification?

Updated: Jun 3

Navigating the Vehicle Financing Process

Congratulations! You've received preapproval for an auto loan – a significant milestone on your journey to purchasing a new vehicle. However, before you head straight to the dealership, it's essential to understand the nuances of the vehicle financing process to ensure you secure the best possible terms for your loan. In this blog, we'll explore the differences between preapproval and prequalification and provide valuable insights to help you make an informed decision.

The Dealership 101:

The allure of convenience may tempt you to head straight to the dealership after receiving preapproval for an auto loan. While dealerships offer on-the-spot financing options, proceeding with caution is essential. Dealerships typically partner with multiple lenders and may prioritize their own financial interests over yours. As a result, you may end up with a higher interest rate than if you had explored alternative financing options.

Understanding the Process:

When you arrive at the dealership, they will run your credit multiple times with their network of lenders to determine what financing options are available to you. While this may seem like a straightforward process, it's important to remember that each credit inquiry can impact your credit score. Additionally, the financing terms offered by dealerships may not always be the most favorable, potentially costing you more in the long run.

The Benefits of Prequalification:

Alternatively, you can opt to secure financing through your credit union or bank before visiting the dealership. This is what we advise our clients to do at PP Credit! By obtaining prequalification, you'll receive an estimate of the loan amount and interest rate you qualify for based on your creditworthiness. Importantly, prequalification typically only results in a single credit inquiry, minimizing the impact on your credit score. Our goal is to have as few hits on your credit as possible.

Why Prequalification Matters:

First and foremost, it allows you to shop for a vehicle with confidence, knowing exactly how much you can afford to spend. Additionally, prequalification enables you to compare financing offers from multiple lenders and choose the option that best aligns with your financial goals.

Making an Informed Decision:

When it comes to financing your vehicle purchase, knowledge is power. By understanding the differences between preapproval and prequalification, you can navigate the financing process with confidence and secure the best possible terms for your auto loan. Before making a decision, we encourage you to explore all your financing options and choose the option that offers the most favorable terms and conditions.

The wrap up: Instead of heading straight to the dealership, consider your prequalification options through your credit union or bank. By taking the time to understand the financing process and compare your options, you can make an informed decision that puts you in the driver's seat on your journey to purchasing a new vehicle.

If you have any questions or need 1 on 1 support we invite you to book a call and let’s connect.

P&P Credit Services is based out of Dallas, Texas, and serves clients across the nation. Give our office a call at 972-984-9446 to learn more about our financial services!


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