What is the difference between prequalification and preapproval for a personal loan?

The terms are used inconsistently across lenders. Here is how to think about the spectrum:

Prequalification: You provide basic info (income estimate, credit range, loan purpose). Lender does a soft pull or no pull at all. You receive an estimate: 'Based on what you told us, you may qualify for $10,000-$25,000 at 9%-15% APR.' This is not a commitment. It helps you shop without score impact. Most major online lenders (SoFi, LightStream, Upstart, Discover) offer this.

Preapproval: Lender has reviewed more of your information - either from a soft pull on actual credit data or from documentation you provided. The offer is more specific ('You are preapproved for $15,000 at 11.5% APR for 36 months') but still conditional on final verification. Many lenders use 'preapproval' to mean a soft-pull-based rate quote that requires a hard pull to finalize.

Full approval: Hard pull occurs. Income and employment are verified (pay stubs, bank statements, or tax returns). The final rate and terms are locked. You sign the loan agreement. This is the binding offer.

Score impact: Only the hard pull (at final approval) affects your credit score. One hard inquiry typically reduces your score by 2-7 points and the effect fades within 12 months. Shopping multiple lenders within a 14-45 day window (depending on scoring model) counts as a single inquiry for FICO scoring purposes.