We talk a lot about getting prequalified for auto loans. It’s an excellent barometer for assessing affordability and a chance to ‘try before you buy’ to make sure you could qualify for the amount you want to borrow. But what’s involved with car loan prequalification in Canada? How do you go about it?
Our auto loan team walks you through the auto loan prequalification process.
Car Loan Prequalification
It’s important to know that car loan prequalification is different to car loan preapproval. Some lenders and auto loan specialists use the two terms interchangeably, but technically they are different things.
Car loan prequalification is an informal process where we work with a lender to provide an outline of whether you could qualify for the amount you want to borrow. Think of it like getting a quote from a contractor.
It’s a proof of concept to see if you’re a good fit and whether you would qualify for lending if you were to formally apply for the loan.
In return for some basic information from you, the lender can assess whether you would meet lending criteria for the auto loan. They may also provide an outline of the expected interest rate.
Getting prequalified is not a loan offer. The interest rate and term are not set in stone. It’s a quote. It isn’t an offer of a loan.
What’s Involved With Car Loan Prequalification?
The auto loan prequalification process is simple. We provide basic information about you to the lender and they check whether someone in your position could qualify for the amount you want to borrow.
Typically, a query would provide basic income information and your credit score. We would also provide the amount you want to borrow over the desired term.
The lender would perform a soft inquiry on your credit report to check you out and then work their magic and assess whether you would pass the application or not. Some lenders will also let us know if the term is acceptable and what a ballpark interest rate would be.
If it all looks good, we will proceed to preapproval.
Getting Pre-Approved for a Car Loan
Auto loan preapproval is a more formal process where you provide a little more detail to the lender to assess. You would be asked for proof of income, proof of ID, tax and perhaps proof of your financial situation.
Think of prequalification as the quote and preapproval as the application and you won’t be far wrong.
The lender would perform a soft inquiry on your credit report to check you out the same as prequalification. Some lenders perform a hard inquiry at this point so it’s important to know what the one you’re dealing with will do.
The lender will return a firm assessment of whether you would qualify for the loan, at what interest rate over what term. This is a firm offer of a loan and you can decide to take them up or not.
If you need help with any part of the auto loan application process, contact our team. We would be only too happy to help!
If you’re ready for a car loan, we’d love to help! simply click here to get pre-approved online today.