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Does Applying for Car Loans Affect Credit?

Finance paperwork with tiny coins and car


If you’re shopping around for a new or a pre-owned Nissan, you’re likely doing a lot of research that involves finding the best interest rates and getting a strong sense of your monthly payment, just to name a few. As you’re looking for that dream car, you may also be applying for financing online to get pre-approved, before making the drive to your local Arlington area dealership. Does applying for a car loan affect credit? While applying for a car loan may knock your credit score down a few points, it doesn’t have a long-lasting impact. Read on with Wolfchase Nissan as we cover how to apply for a loan online and the effects it has on your credit score.

 

 

Preapproval vs. Prequalification: What’s the Difference?

As you’re combing through websites for your next Memphis driver, you’ll likely come across two different terms: preapproval and prequalification. While they may seem similar, they mean completely different things. When applying for prequalification, this usually entails a soft credit inquiry which doesn’t impact your credit score. To get prequalified for an auto loan, you’ll typically provide some basic information such as your income and expenses. Remember, the prequalification offer you receive is not set in stone and can easily change once the lender performs a more thorough look at your credit report.

The pre approval is much more tedious as lenders will perform a hard credit inquiry and take a more in-depth look at your credit report. They’ll then provide you with an amount that you’re allowed to borrow based on information such as your income, monthly expenses, debt-to-income ratio, and other factors.

How to Apply for a Car Loan Online Without Hurting Your Credit

When you apply for preapproval, because this involves a hard credit inquiry, it will knock your credit score down a few points. However, don’t be too put off by this fact. What’s great about most credit models is that they allow you to shop around for the best interest rates without it doing significant damage to your credit. If you apply for multiple auto loans, be sure to do it within a 14-day window as these hard credit pulls will generally be treated as a single hard inquiry.

What Do You Need to Apply for a Car Loan?

Applying for a car loan in Cordova is quite a simple process. Most dealerships like Wolfchase Nissan allow drivers to apply for a car loan online, which can be done right from the comfort of home. When you apply for a car loan, you’ll need the following documentation:

  • Proof of income such as a paycheck stub or a bank statement
  • Proof of insurance as insurance is both required by law and required to get a car loan
  • Identification like an ID and a corroborating identification document like a utility bill with a matching address
  • Proof of Residence such as utility bill

Once you’ve provided the necessary documentation, the financing process will commence. Keep in mind that the better your credit score, the better interest rate you’ll receive from lenders. However, even if you don’t have the best credit score, some lenders will still work with you, though you may need a cosigner and will likely end up with a higher interest rate.

Learn More About the Car-Buying Process With Wolfchase Nissan

If you want more information on how to apply for a car loan, or how to get the best interest rate possible, contact Wolfchase Nissan. We’re committed to helping our customers from Memphis and beyond get the best offer for their financial circumstances.

 

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