‘Your loan for Rs 1,00,000 is approved. Contact your bank to avail the offer’
You may have come across this kind of SMS, Emails, or App notifications many times and these messages are examples of Pre-approved Loan offers sent out by banks, NBFCs, or other financial institutions.
The general application process starts with the borrower applying for the loan and submitting documents post which the same is verified and the loan amount is credited to his/her bank account.
However, when it comes to a pre-approved loan, the process becomes a lot shorter.
In case of a pre-approved loan, the lenders themselves offer a loan or credit to a borrower after all the necessary verifications have been completed. All the borrower has to do is accept the offer and then the funds are transferred to his/her account.
Pre-approved offers may be extended by banks, non-banking financial institutions or even credit card issuers. These loan offers can come for all sorts of loans like personal loans, home loans, vehicle loans, etc.
Pre-approved loan or pre-approved personal loan offers are extended to customers by the lenders who show a good credit history and/or have a good relationship with the bank.
These offers are also offered by credit card companies to their customers who have been responsible users of the credit card for several years. Additionally, you may also need to have a certain amount in your bank account in order to be offered pre-approved loans.
Pre-approved loan offers are often limited period offers, so you would need to avail it while it lasts.
While the eligibility criteria for pre-approved loan or pre-approved personal loans may vary from one lender to another, having an excellent credit history is mandatory. Lenders will only offer pre-approved loans to customers who have demonstrated a track record of repaying their loans on time.
A pre-approved loan of a certain amount will be offered to you based on your credit history and relationship with the lender.
Once you get the offer, you can apply to avail the same. While certain documents may be required, the amount will be much lesser than what would be needed for a regular loan. After you submit the asked documents, they will be verified and the loan amount will be transferred to your account shortly.
But, you should keep in mind that just receiving a pre-approved loan offer does not guarantee the loan. If there are any variations in your details such as a change in your take-home salary or credit score, there are chances that the pre-approved loan offer will be withdrawn.
Pre-approved loans come with their own set of advantages. These include -
Since the lender would have had most of the necessary documentation, the borrower may not have to provide any more information.
The processing and disbursal of the loan takes very little time as the eligibility criteria are already established and checked by the lender before making the offer.
Beneficial Interest Rates
Pre-approved loans come with lesser interest rates as compared to the ones offered generally as these loans are offered only to the creditworthy customers.
Pre-approved offers are sent only to a select few. So these offers are customized to suit the needs of the customers.
Ability to negotiate on the offer
In case of a pre-approved offer, the bank or your lender approaches with a loan offer, instead of you approaching the lender. So you might have a chance to negotiate some terms and conditions or even get your interest rate reduced by a few points.
While there are some advantages to a pre-approved loan offer, there are certain disadvantages as well. These include -
Availing a Loan Unnecessarily
It is natural to be tempted by a pre-approved loan offer. However, availing credit involves responsibility as the same needs to be repaid on time, with interest. Getting a loan even when it’s not needed may financially burden you.
May Carry a Higher Rate of Interest than the Market
While pre-approved loan interest rates are generally lower than regular interest rates, it can still be higher than the market rate. Therefore, you must check for this before deciding to accept a pre-approved loan offer.
Terms and Conditions may not be favourable
As pre-approved loans are offered upfront by the bank, the conditions attached to the loan may favor the bank. So, it is important to check for all the terms and conditions of the loan before accepting the offer.
Loan is not Guaranteed
Even though the loan offer is pre approved, your bank may eventually not disburse the loan if your creditworthiness is not upto the mark or your relationship with the bank is not good.
Pre-approved loans or pre-approved personal loans are quite popular and a way for the lender to disburse more loans. Additionally, it can also be advantageous to borrowers as the application process is much shorter and the interest rates may be on the lower side as well.
However, just because you can get a pre-approved loan does not mean that you should, especially if you are not in a position to repay the same. Take a look at all the terms and conditions attached and then decide based on your requirements and financial situation.
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