• Pre Approved Personal Loan

    Pre-approved personal loans are instant loans that are disbursed to select customers. It requires minimum documentation and no collateral or security. All you need is a good credit history and repayment record to be eligible for the instant loan facility.

    This type of loan facility is offered by many banks and non-banking financial companies (NBFC) in India in order to increase the sale of loan products, to meet the urgent financial needs of customers, and to decrease the loan disbursal time considerably. The rate of interest offered can be between 10.49% p.a. and 14% p.a. for pre-approved loans. However, the rate of interest may differ from bank to bank and you must check with the lender the interest rate before availing a personal loan.

    Pre-approved loans are a promotional exercise by banks to increase the sales of their loan products. There are several possible reasons why you may be chosen as an eligible customer:

    1. The bank might have checked your credit score and found you a good customer;
    2. The bank might have reviewed your credit history with them and noticed good bank balance and transaction rate;
    3. You may have taken a loan from the bank previously and made prompt and regular repayment;
    4. The bank might be monitoring your income and expenditure rates in comparison with your credit-worthiness.

    Top banks that offer Pre-approved loans

    Bank name Loan amount Rate of interest Processing fee Repayment tenure
    State Bank of India At the discretion of the bank At the discretion of the bank NIL At the discretion of the bank
    ICICI Bank Up to Rs.10 lakh 11.25% onwards 1.25% of loan amount + GST Up to 60 months
    HDFC Bank At the discretion of the ban 10.50% onwards At the discretion of the bank Up to 60 months
    Aditya Birla Capital Up to Rs.15 lakh 14% onwards At the discretion of the bank Up to 36 months
    IDFC First Bank Up to Rs.40 lakh 10.49% onwards Up to 3.5% of the loan amount Up to 60 months

    Features of Pre-approved Personal Loan

    • Quick loan disbursal: If you are an existing customer of the bank or NBFC, the pre-approved loan will be disbursed directly to your account in a very short time.
    • Minimum documentation: Instant loans are easy to obtain; the process is considered hassle-free because it doesn't require heavy documentation for loan approval.
    • No collateral or security required: The pre-approved loan customers need not provide any security or collateral to obtain instant loans.
    • Varying loan amounts: The pre-approved loan amount varies for every individual. The loan amount depends on factors like the customer's credit history and repayment record.
    • Repayment facility: You have to repay pre-approved loans in Equated Monthly Instalments (EMIs). Those customers who have an existing account with the bank (lender), can opt for auto-debit facility to pay the EMIs. The standard repayment tenure is 12 to 60 months.
    • Fees and charges: Lenders levy certain fees and charges on customers during and after the disbursal of pre-approved loans such as processing fees, secure fee, EMI bounce charges, outstation collection charges, penal interest, foreclosure charges, etc. The terms and conditions of the applicable fees and charges differ with lenders.

    Benefits of Pre-approved Personal Loans

    • Instant funds or quick funding: Being eligible for pre-approved loans makes it a safety net for when you need urgent funding to meet your financial needs. The loan will be approved and disbursed on the same day within a few minutes once the verification process is successful. You can use the loan amount for any personal purpose.
    • Competitive interest rates: You are eligible for an instant loan offer if you have a good credit history. Your clean repayment record indicates financial discipline; hence, the lender will offer the loan at a competitive interest rate as you don’t fall under the lender-risk/credit-risk category.
    • Flexible loan tenure: You can choose a loan repayment period that is suitable for you. It usually ranges between 12 and 60 months. Consider your repayment capability when choosing the loan tenure so that you don’t default on loan repayment.
    • Minimum to nil documentation: Existing customers who are eligible for instant loans need not worry about documentation as the bank will have your KYC, bank, and income details in their database.
    • Paperless loan application process: Most lenders offer online loan facility wherein you can apply for a pre-approved loan through their website or mobile app by filling up and submitting an online form. Soft copies of the necessary documents can be uploaded in the required format to the website or mobile app of the lender.
    • Quicker processing time: Since you have already passed the eligibility criteria for the loan, you will not be subject to severe scrutiny. If your papers are in order and all financial information tallies, then your loan could be approved and disbursed within a day.
    • Negotiation power: In a pre-approved loan, the bank is approaching you with a product and instead of you walking in with a request. This means that you are in a position to negotiate the terms of the loan with your bank manager or relationship manager and bring down the interest rate or increase the tenure or repayment term. If you are making an online application, however, this advantage would not be available as there is no human intervention.
    • Special discounts: To lure you into taking a pre-approved personal loan, the bank may also add small benefits such as processing fee waiver, lower interest rate than that for regular customers, EMI holidays for 1-3 months, etc. If you really need a loan, these perks will help to slightly reduce your overall estimated debt.

    Eligibility for Pre-approved Personal Loan

    • Eligible customers must have a good credit history.
    • Should be existing customers of the bank. Certain banks lend to new customers as well.
    • Must have a clean record of repaying debts.

    Customers with no credit history and repayment record are also eligible as long as they have substantial savings in their account and a stable source of income.

    How to Apply for Pre-approved Personal Loan?

    1. Check with your bank if a pre-approved loan offer is available for you. You can log in to your net banking account to check if you are eligible for a pre-approved loan.
    2. Submit a duly-filled loan application form which can be obtained from the lender's website, branch office, through SMS, or mobile app.
    3. Choose the required loan amount and suitable repayment tenure.
    4. The loan amount will be credited to your bank account after successful verification by the bank and your acceptance of the offer.

    NBFCs may ask for documents like bank account statements, previous 3 month's salary slips, employee ID card, and KYC details like PAN and Aadhaar card.

    Tips to Get Pre-approved Personal Loan

    • Maintain a high credit score, a good credit history, excellent repayment record, stable source of income, and substantial savings in your bank account to get a pre-approved loan.
    • Such loans may be available for a specified period only, therefore, check with your lender.
    • Don't forget to go through the terms and conditions of such loans with your lender, especially the applicable fees and charges.
    • Before applying for the instant loan, do a bit of research. Compare available features and interest rates of other loan offers with your pre-approved loan offer and choose the one that best suits your needs.

    Disadvantages of Pre-approved Personal Loans

    • Pre-approved loans may be valid only for a few days as an exclusive deal. So if you really want to take the loan, you need to act fast.
    • A bank is not legally bound to sanction your loan once it makes a proposal for a pre-approved loan. If any discrepancy is found in your documentation or credit score, the application can be rejected. “Pre-approved” only signifies your eligibility for loan, and not instant approval and disbursement.
    • Check the interest rate for regular before accepting a pre-approved loan. While it is quite likely that the interest rate on the loan sanctioned to you may be 1-2% less than the market rate, some banks may increase their interest rate for pre-approved customers.
    • Before signing the loan deal with any bank, take a look at the schedule of fees and charges. Some banks may charge additional processing fee on pre-approved loans, or put in extra fees such as transaction fee, or put a high penalty on foreclosures and partial pre-payments.

    Just because the bank is offering you a loan does not mean that you should take it. Get into debt only if you are really in need of the money. If you are taking up the offer, ensure that you take the amount that you need and not the amount that the bank is willing to give. For example, if the bank is offering you Rs. 5 lakh for 5 years, but you need only Rs. 3 lakh that can be paid back in 3 years, go ahead and negotiate a better deal.

    FAQs on Pre-Approved Personal Loan

    1. I received an SMS for a pre-approved personal loan from my bank. Why was I chosen for an instant loan offer?
    2. Pre-approved loans are a promotional exercise by banks to increase the sales of their loan products. There are several possible reasons why you may be chosen as an eligible customer:

      • The bank might have checked your credit score and found you a good customer.
      • The bank might have reviewed your credit history with them and noticed good bank balance and transaction rate.
      • You may have taken a loan from the bank previously and made prompt and regular repayment.
      • The bank might be monitoring your income and expenditure rates in comparison with your creditworthiness.
    3. What is the evaluation process for a pre-approved personal loan?
    4. Lenders check your credit score, credit history, bank balance, and income details. If you have a high credit score, a good credit history, excellent repayment record, stable income, and sound savings in your bank account, then you are eligible for a pre-approved loan.

    5. I have a pre-approved loan offer. Should I opt for it?
    6. Before applying for any type of loan, it is important to consider your financial needs. Only if you are in urgent need of funding should you opt for a pre-approved loan. It is better to be debt-free. You can save the money that will otherwise be used to repay the loan in EMIs each month.

      Availability of quick funding doesn’t necessarily mean you should go for it if there is no immediate need. On the other hand, if you can afford to repay the loan on time, then you can opt for an instant loan with suitable and beneficial features.

    7. What are the differences between personal loans and pre-approved personal loans?
    8. Personal loans and pre-approved loans are usually short-term credits that require no security or collateral. The difference being, pre-approved loans are an invitation to apply for quick funding while personal loan applications can be approved or rejected by the lender.

      • Availability: While you can apply for a personal loan at any time, pre-approved loan offers are available only for a specified period.
      • Eligibility: Banks make pre-approved personal loan offers to their existing customers who have a good credit history, clean repayment record, stable source of income, and disciplined savings history. On the other hand, individuals who apply for a regular personal loan from a bank or NBFC must check if they meet the eligibility criteria like age, income, credit score, and so on before applying for it, or else they may face rejection.
      • Disbursal time: Pre-approved loans will be disbursed within 3 seconds to 5 minutes while lenders take anywhere between 4 hours to a few days to disburse personal loans.
      • Documentation: Minimum to nil documentation is required for instant loans while the documentation process can be heavy for personal loans. This is because the lender already has the existing customer’s KYC details in the case of instant loans.
    9. Does a pre-approved loan offer mean guaranteed loan approval?
    10. Pre-approved loan offers do not mean that your loan application will be approved for certain. Your loan request, although “pre-approved", can be rejected by the lender if your credit score is low or if you do not meet an eligibility requirement during the verification process.

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