Imagine you're at the car dealership, eyeing the perfect car that fits all your needs and desires. But before you can take it for a ride, there’s an important step you need to consider: getting the right Car Loan. Understanding the difference between pre-qualified and pre-approved for an Auto Loan becomes crucial. Let's simplify and set you on the smooth road to car ownership.
What does it mean to be pre-qualified and pre-approved?
Pre-qualified for a Car Loan
Getting pre-qualified involves providing a brief overview of your financial status to a lender, such as your income, debts, and credit score. The lender then gives you an estimate of the amount you might be eligible to borrow. This process is often done over the phone or online and doesn't require a detailed examination of your credit report.
Advantages:
- Quick and easy to get
- No impact on your credit score since it usually requires only a soft credit check
- Helps set a realistic budget when car shopping
Pre-approved for a Car Loan
Pre-approval is when the lender thoroughly checks your credit history and financial background. This step comes closer to a formal loan offer and involves completing a detailed loan application. You'll receive a specific loan amount, interest rate, and approved loan term pending final verification of your financial documents and the vehicle details.
Advantages:
- Provides a more accurate loan amount you can afford
- Gives you bargaining power at the dealership, similar to a cash buyer
- Speeds up the financing process once you find a car
Pre-qualified vs Pre-approved Car Loan: Key differences
The main difference between being pre-qualified and pre-approved for a Car Loan lies in the level of scrutiny of your financial background and the certainty of the loan terms offered.
1. Certainty and confidence:
- Pre-qualification gives a rough estimate, which is subject to change once a full credit analysis is done.
- Pre-approval offers a firm loan amount and terms, making it a stronger option when negotiating prices at the dealership.
2.Impact on Credit Score:
- Pre-qualification often requires only a soft credit pull, which does not affect your credit score.
- Pre-approval typically involves a hard credit inquiry, which might temporarily lower your credit score.
Application process:
- Pre-qualification is simpler, requiring less information from the borrower.
- Pre-approval is more detailed and provides a better commitment from the lender.
Choosing the right Car Loan for you
When deciding between a pre-qualified vs pre-approved Car Loan, consider how you value certainty against simplicity. Prequalification is your best bet if you're keen on shopping without impacting your credit score. However, preapproval might be the way to go if you're serious about purchasing and want to streamline the buying process.
The pre-approval route can benefit those interested in a pre-owned Car Loan. It allows you to negotiate more effectively, knowing exactly how much you can spend and under what terms.
Car Loan options
Axis Bank presents an assortment of Car Loan options, each designed to cater to the diverse needs of buyers.
Axis Bank's New Car Loan caters to those looking to buy a brand-new vehicle, offering loans from ₹1 lakh with the possibility of financing up to the full on-road price. Flexible repayment options extend up to 7 years to help you with easy management.
Further, Axis Bank provides Used Car Loans for pre-owned vehicles starting from ₹1 lakh. You can finance up to 95% of the valuation amount for sale-purchase and 85% for refinance, with a repayment period of up to 5 years.
Also Read: Understanding Car loan tenure
Existing Axis Bank customers can enjoy the benefits of a Parallel Loan starting from ₹1 lakh. This option is perfect for those who need a bit of extra funding with a pre-approved offer and a repayment tenure of up to 4 years.
Each type of Car Loan is designed to meet different needs, whether it's the excitement of a new car, the value of a used one, or the convenience of additional funding for existing customers.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
