Like most people, you probably receive loan offers regularly in the mail or via email. Whether for auto loans, credit cards, debt consolidation loans, or home loans, the verbiage is probably very similar – they all offer you the opportunity to apply for a loan.

However, you may have noticed that some of the solicitations reference being “pre-qualified,” while others say “pre-approved.” These terms seem similar, but they actually have two separate meanings. Understanding their differences could give you some insight into where you stand with the lender and what your next steps should be.

When You’ll See These Offers

Before diving into what each offer means, it’s important to identify when these terms are typically used. The two most common ways you’ll come across the “pre-qualified” and “pre-approved” terminology are:

  • Lender Solicitation: You receive a loan or credit card offer in the mail or via email from a lender.
  • Loan Application: You begin the loan application process with a lender.
What Does It Mean to Be Pre-Qualified?

When comparing “pre-qualified” and “pre-approved,” the former is like the minor leagues. Being pre-qualified is a great start, but it doesn’t necessarily mean you’ve made it quite yet.


Lender Solicitation:

Typically, when you receive an offer from a lender, credit card company, car dealership, or mortgage broker with “pre-qualified” in the verbiage, it means you met certain qualifications. These entities might have filtered data, seeking individuals with certain income levels or home values. While you fit into the mold of the ideal candidate they are seeking, a pre-qualification is not guaranteed.

Many factors, such as your credit score and monthly income, would still need to be reviewed before you’re approved for a loan from these solicitors.


Loan Application:

How you apply for a loan could also result in a “pre-qualified” offer. For example, assume you’re interested in buying a home. You call your financial institution and ask how much you’d be able to borrow. If you’re looking for a quick estimate, they may ask basic questions, such as your monthly income and outstanding debts. Once they have this information, they could “pre-qualify” you for a specific amount.

While this figure will help you in your search for a new home, it’s far from the lender approving you for a mortgage. You would still need to apply for the loan formally, have your monthly income and credit report verified, etc.

What Does It Mean to Be Pre-Approved?

As if “pre-qualified” and “pre-approved” weren’t confusing already, there are actually two common types of pre-approvals – and they have different meanings.


Lender Solicitation:

If you receive a pre-approved offer from a lender, that usually means the lender already pulled your credit and verified your outstanding loan balances. They do this through what is known as a “soft inquiry,” and it has no impact on your credit score.

This method allows the lender to make an offer that will be honored if you meet certain requirements. For example, the lender will still require you to apply for the loan so that they can verify nothing has changed on your credit report and that you still meet the monthly income requirements. If you meet these terms, you should receive the loan per the terms offered in the solicitation.


Loan Application:

The other type of pre-approval comes when you apply for a loan. In this instance, the pre-approval holds significant weight and will be honored unless something drastic changes, such as a sudden job loss.

For example, when you apply for a car loan, the lender will review your credit report, verify your income, analyze your outstanding debts, etc. Then, if you meet their requirements, they will pre-approve you for a specific amount. You can now go to a dealership and buy a car within your pre-approved amount.

When looking for homes, most sellers will only entertain bids from potential buyers that are pre-approved. This means their financial institution has reviewed their finances in-depth and pre-approved them for a specific amount. The pre-approval lets the sellers know the buyer is serious and has the ability to purchase the home.


As with any industry, the specific jargon and terminology used in the financial world can be confusing. While “pre-qualified” and “pre-approved” sound the same, they can be as different as night and day in some instances (e.g., applying for a mortgage).

If you’re interested in an offer from a lender about a loan or credit card, check to see if you’re pre-qualified or pre-approved. If you’re pre-approved, your chances of receiving the loan will be significantly higher.

We’re Here to Help!

As your financial partner, we’re always available to answer your questions. Even if it’s about an offer from another lender, our team is here to ensure you understand the terms and help you make the best financial decisions.

If you’re interested in being pre-approved for a loan, please stop by any of our convenient branch locations or call (949) 588-9400 to get started today.


Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.