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The Pros and Cons of Getting Pre-Qualified for an Auto Loan

October 12th, 2022 | 10 min. read

The Pros and Cons of Getting Pre-Qualified for an Auto Loan

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Need a stress reliever in this car buying process? You may want to look into getting pre-qualified on an auto loan through your preferred lender. Better yet, look into joining a credit union to get pre-qualified since credit unions typically offer better rates other lenders may not.



I wish I knew that when I purchased my first car years ago... 

If you read the Auto Loan Documentation Checklist, I talked about my lousy auto loan experience. I didn’t have all my documents to finalize my application at the dealership so the process took FOREVER!  Well, guess what else I failed to do before applying? I’m sure you guessed it – get pre-qualified.    

Now that I’m older with some years of financial experience under my belt at a credit union, you can trust me here to deliver the goods on the topic of pre-qualifying for an auto loan. 


Law-Iconpre-qualified or pre-approved: what’s the difference?!?

Getting pre-qualified and pre-approved are similar due to the lender collecting your financial information, but there are a few key differences:




so, let's talk pre-qualifying... 


Stopwatch-Iconwhen should i pre-qualify for an auto loan?

You can pre-qualifying for an auto loan before officially applying or getting pre-approved. Getting prequalified provides a general idea of what your approval odds would be. This includes receiving an estimate on loan terms, the range of rates you could qualify for, and the amount you could get if approved by your preferred lender.

Depending on your lender, you can even pre-qualify for an auto loan on their website.  Some lenders prefer their customers to inquire about an auto loan in person.  When pre-qualifying in person, you can form a relationship with the lender and help your approval odds to receive an auto loan.  


Checklist-Iconwhat should i bring to start the process?  

Pre-qualification for an auto loan doesn't require you to submit supporting documents like proof of insurance. Knowing the following information will help your lender consider the best options when seeking the best loan amount.

Be ready to tell your lender the following info to receive an idea of the auto loan you could qualify for.

      • Interested Loan  Amount
      • Credit  Score
      • Income
      • Current Debt Obligations

You can pre-qualify instantly without submitting paperwork application supporting documents, no credit impact, and no social security number required. This is just an informal process that will better understand where you might fall if approved.


the pre-qualification Pros
      • Prequalifying does not hurt your credit score: Whew! What a relief, right?  When pre-qualifying, there is a soft credit inquiry on your credit score. (This doesn't hurt your credit score at all.) It's just part of the process that helps the lender indicate if you qualify for an auto loan.
      • Prequalifying helps with budgeting: YAY! You get a chance to save money. A significant part of pre-qualifying for an auto loan is to have an idea of what you can borrow. This will help you focus on the cars you CAN afford.
      • No need to finance at the dealership:  Other lenders can provide better loan rates. Auto Loan rates at the dealership tend to be higher than credit unions.
      • Need more time to decide? You got it! – Pre-qualifying for an auto loan means you're not locked into an agreement. If you need additional time to save money or improve your credit score for a better rate – you got it! Prequalifying is simply an informative approach before applying for an auto loan.


the pre-qualification cons
      • Pre-qualification does not guarantee an auto loan approval. The initial loan amount, interest rate, loan term, and monthly payment that was quoted when pre-qualified could change when actually applying for the loan. 
      • Getting pre-qualified doesn’t always leave room for negotiation. By showing the dealer how much you’ve been pre-qualified for, you’re showing them what you’re prepared to pay upfront. This means you may miss out on a chance to negotiate the price down.
      • You could miss out on a sweet deal.  Sometimes, dealers will throw in some sweet discounts if you choose to finance through them. If you want to take advantage of their offers, go ahead! You can always refinance with your preferred lender once you get the best deal.

Calendar-Checkmark-Iconwhat’s next after i pre-qualify for an auto loan?  

Research to your heart's desire! If you haven’t started already, find the vehicle you want. Once pre-qualified, you’ll have an idea of what kind of budget you’re working with.

"At Skyla, the most important thing for members is to do their own research so they aren't walking into a dealership blind. A car dealer may not provide the best deals."

- Susan Espinosa, VP of Member Experience 

now let's talk pre-approvals... 


Stopwatch-Iconwhen should i get pre-approved for an auto loan?

The turnaround time for a decision is very fast (almost instant) especially if you have all of your supporting documents to apply for an auto loan.  Once you're pre-approved, the auto loan is valid for 30 days, so you have some wiggle room before you seal the deal!


Checklist-Iconwhat should i bring to start the pre-approval process?  

When you apply within the branch, our Customer Relationship Specialists will provide an answer on the spot.  Make sure to have your proof of identity and residence, income, insurance, and banking history handy. Check out our article, Auto Loan Documentation Checklist: 6 Things You'll Need, to ensure you have everything covered applying. 

Learn More


The Pre-Approval Pros

When you’re pre-approved, the car-buying process is much easier. Why?

      • You’ll know exactly how much you can spend when comparing cars.
      • You’ll have even more negotiating power at the dealership.
      • You'll have the ability to shop around and purchase immediately.


The Pre-Approval Cons
      • The lender is going to run your credit, so make sure you're ready to buy. After 30 days, your lender needs to make another hard credit inquiry to apply for another loan. If you have a change of heart on the car you want and select another vehicle that costs more, you’ll be outside of the approved loan amount and need to start over.
QUICK TIP: Lenders look at more than your credit score when deciding on a member’s auto loan application. Keep this in mind if you’re looking to apply for a loan. To learn more, give Skyla a call at 704.375.0183 or send an email by completing the form here .


Calendar-Checkmark-Iconwhat’s next after i get pre-approved for an auto loan?

It's time to get the dream car!  You've got your funding set, so all you have to do is head to the seller and drive off with your new wheels. 


ready to roll? here's what's next...

If you find yourself asking if you should pre-qualify for a car loan - keep in mind that you should pre-qualify before you buy. Pre-qualifying will certainly save you time and money when learning what interest rate and loan amount you could get with your auto loan before the lender runs your credit.    

Remember - pre-qualification is not pre-approval, and it's not an official way of receiving a loan. Pre-qualifying is just the first step of knowing what auto loan, interest rate, and term of the loan you could receive if approved.  Once you pre-qualify - shop around with the loan amount you could receive.  

IMPORTANT NOTE: While this article provides general information about the pros and cons of getting pre-qualified for an auto loan, please be aware that Skyla Credit Union does not offer pre-qualification for auto loans. If you're considering an auto loan and are unsure about your eligibility, our dedicated Customer Service Representatives are ready to assist you.

We can guide you through our application process and help assess your options based on your individual circumstances. Feel free to contact us here, call us at 704.375.0183, or drop by any of our branches . We're here to help you navigate your financial journey. 




As the Content Specialist and author of the Learning & Guidance Center, Yanna enjoys motivating others by uncovering all that's possible in the world of finance. From financial tips and tricks to ultimate guides and comparison charts, she is obsessed with finding ways to help readers excel in their journey towards financial freedom.

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