Pre Approved Loans are pre-approved by lenders.
Everyone gets calls promotional calls from finance companies to ask about their interest in taking a loan. Eventually, you hear about Pre Approved Loans on these calls.
Pre Approved Loans are given to a named group of people only. These people are those customers who have a strong credit history and they’re responsible for paying debts.
The financial health of a client is the basis of a loan offer.
Next time you’re going to a lender check whether you’re eligible for a pre-approved loan. Soon you’ll know why you should do it!
These loans help you to take care of immediate expenses and they don’t bear collateral.
Public and Private Banks, Non-Banking Financial Companies (NBFC) offer pre-approved loans.
How Do Pre Approved Loans Work
Interest is charged only on the amount that’s used by the customer from the credit limit. You don’t pay interest on the eligible credit limit. Customers can use part of the credit limit. He’ll still have access to the remaining amount if he needs it in the future.
Benefits Of Pre Approved Loan
- You can get a competitive interest rate because of your good credit history.
- Loan tenure is very flexible ranging from 12 to 60 months.
- If you are an existing customer you do not need to provide documents. The lender can collect information from the database.
- Customers can use a website or mobile applications for filling loan forms.
- It takes a very short duration of time. In some cases, the customer gets the money in a day.
- You have the negotiation ability. You can negotiate the terms of the loan with the loan manager.
- Lenders offer discounts and benefits on interest rates, processing fees.
Beware Of Fake Offers
You should always keep in mind that your previous lender is most likely to offer you’re-approved loan.
Always cross-check official documents against the website of a lender to make sure that the offer is authentic.
Look for signs of forgery like description, logos, spelling miscalculations, website links in documents.
Don’t give your card details, OTP, personal information.
Should you go for a pre-approved loan? Here’s all you need to know
Factors that make you eligible for getting a pre-approved loan offer
On what basis does a lender decide whether you are qualified for the offer?
The following is a list of checks that form the evaluation process for a pre-approved loan:
- · You possess an excellent credit score
- · You are diligent with the repayment of your credit card bills
- You have never missed out on paying your EMIs if any
- Your income source is stable
- You have maintained a sound savings account balance
If you get a pre-approved loan offer, then your creditworthiness has already been recognized by the lender and you do not need to go through the initial screening that a borrower usually has to undergo when applying for a loan. However, you are still required to produce necessary verification documents and perform other required formalities in case you wish to avail of the pre-approved loan.
The following is the list of documents you need when applying for a pre-approved loan:
- Bank statements (usually 6 months)
- Last three months’ salary slips
- PAN Card
- Proof of residence (Driving License, Aadhaar Card, Passport, etc.)
Advantages of pre-approved loans
Low-interest rate: On account of your good credit score, the interest rate charged on your pre-approved loan is usually lower than what would be charged if you apply for the loan otherwise.
Quick processing: Since the initial screening of your credit history is no longer required, your bank can skip to other remaining formalities, thus reducing the processing time of your loan application.
Better terms: Sometimes, when you are a pre-approved customer, you can get the benefit of negotiating the terms of the loan (EMI tenure, etc.) at your convenience.
Disadvantages of pre-approved loans
The offer is extended to you based on the assessment of your creditworthiness even when you have not applied for a loan yet. And since these offers are valid for a limited period of time, the timing may not necessarily coincide with your requirement of a loan.
Further, there is no point in taking a loan if you do not require it, just for the sake of availing the benefits of pre-approval. It is better to opt for a credit line instead, where you can get final approval and still won’t have to pay any interest until you actually use the money from your approved limit.
Also Read: Consumer Loan: All You Need to Know