Pre Approved Personal Loans
Pre-approval of personal loans basically means that the bank is willing to provide a quick loan as long as you fulfil basic eligibility criteria. Sometimes banks offer pre-approved loans after analysing your financial credibility and credit record.
Banks offer pre-approved loans to customers to promote their loan products. Banks choose an eligible customer based on certain reasons such as:
- If you hold an account with the bank and you have been a good customer, paying all your bills on time, the bank might consider giving you a pre-approved loan.
- They may be aware that you always maintain a good credit record and a high bank balance and transaction rate.
- The bank may determine your income as well as expenditure and consider you creditworthy.
Pros of Pre-approved Loans
Pre-approved loans can be beneficial owing to the following reasons:
Processing time: Pre-approved loans do not take a lot of time for processing as you are already considered to be eligible and the verification process is not so strict. As long as your documents are in place, loan disbursal can be done in a day.
Selection of loan terms: As the bank approaches you with a loan in this case, you are in a better position to negotiate the terms and conditions being offered in the loan, such as the rate of interest, loan tenure, repayment term, etc. Meanwhile, if you were applying for a loan online, you would not have this advantage.
Discounts and offers: In order to sell the loan product, sometimes banks offer your pre-approved loans with some added benefits such as lower interest rate, processing fee waiver, EMI holiday for a certain period, etc. These perks may help you decrease the overall debt towards the loan.
Cons of Pre-approved Loans
If you decide to go ahead with a pre-approved loan, you should remember the following things:
- Even if a bank approaches you with a pre-approved loan, it does not guarantee sanctioning of the loan. It simply implies your eligibility for the loan and if you cannot submit the required documents or your credit score is not up to the mark, the bank may reject your personal loan at a later stage.
- Pre-approved loans may not be always available and hence, you must take the opportunity when you can.
- Pre-approved loans may not always be granted at lower interest rates than the ones available in the market. Some banks may increase the interest rate for pre-approved customers.
Some banks may charge additional processing fee for pre-approved loans, therefore it is a good idea to check the schedule of fees and charges before signing the loan.
No matter how tempting the pre-approved loan sounds, it is better to think twice before accepting the offer from any bank. In some cases, it may prove highly beneficial especially if you were intending to take a personal loan in the future. However, taking a loan without actually having the need for it could turn into a burden.