Summary of this article
Pre-approved loans are offered in principle and are subject to fulfilment of eligibility criteria, and applicable terms and conditions.
Any bank account holder or a borrower who already has loan accounts with high credit worthiness is eligible for pre-approved loans.
However, pre-approved offers are timebound and may expire after a while.
Instant loans! Approved just for you! Just as it sounds, pre-approved loan offers mean money that’s quick, convenient, and coming your way. But that should not make you accept it instantly. While some people find these offers too good to pass up, others choose to reject them. The reason: they understand how instant loans work, what they actually cost, and whether they make sense for them.
Here’s what you should know before you accept that pre-approved loan offer landing in your inbox.
Pre-Approved Loans
As the name suggests, these loans are approved before you actually apply for them. These loans are offered in principle and subject to fulfilment of eligibility criteria, and applicable terms and conditions. Pre-approved loans mean that banks already know about your creditworthiness. This includes knowing your credit score and your income.
“Banks may ask you to submit additional documents such as your ITR return and latest income proof to validate your repayment capacity and current income position. Banks can offer you a pre-approved loan which can be secured or unsecured. You can get pre-approved offers for home loans, car loans, bike loans, personal loans, etc,” says Adhil Shetty, CEO, Bankbazaar.com.
Who Receives The Pre-Approved Loan Offer?
Any bank account holder or a borrower who already has loan accounts with high credit worthiness is eligible for pre-approved loans. However, pre-approved offers are time-bound and may expire after a while. Individuals with a high credit score, no loan default history, high salary as per ITR documents or people who maintain a high balance with the bank have a better chance of receiving a pre-approved loan offer.
Pre-Approved Loans Vs Regular Loans
In pre-approved loans, the lender already has information about the borrower’s eligibility criteria. However, in case of a regular loan, the bank receives the loan application first and then verifies if the customer is eligible or not. If you get offered a pre-approved loan, the lender already discloses the eligible loan limit, interest rate and the applicable charges. However, with a regular loan application, you don’t know how much you will be eligible for at the time of application.
The loan amount is decided later on by the bank depending on your credit score, age of the applicant, existing debt obligations etc. Applying for a pre-approved loan does not affect your credit score if you choose not to accept it. However, when you apply for any other loan, it will slightly decrease your credit score.
How To Know About Pre-approved Loan Offers?
Most banks and financial institutions send these offers to their customers through email, WhatsApp messages, SMS or mail alerts on the customer’s mobile/online banking apps. The bank’s customer service agents may also call you to intimate you about the same. You can also check for pre-approved loan offers online by visiting a loan aggregator.
Can A Pre-Approved Loan Offer Be Rejected?
You may reject a pre-approved loan offer. There is also a chance of your loan getting rejected by the lender. This happens if the loan requires you to submit certain documents. If these documents are not submitted by you within the given time-frame, your application can get rejected. Banks offer a pre-approved loan based on the information they already have about you. If the bank finds a major discrepancy between its information and what you provide them during the due diligence process, it can reject your loan. This can happen in case of recent job change, sudden drop in credit score, reduced financial capacity, changes in bank’s pre-approval criteria, if the property is not verified during the bank’s due diligence process, and so on.
Things To Keep In Mind Before Accepting Loan Offers
The best thing to do is to accept a pre-approved loan offer when you actually need it. Don’t take a loan just because you are eligible for it and it is readily accessible. Compare the interest rate, tenure, charges and all other applicable terms and conditions of your pre-approved loan with other loans offered by the same bank and with loans offered by other banks.
Accept the pre-approved loan offer only if the terms are matching or are better than the other bank’s offer. Lastly, make sure the pre-approved offer is from a legitimate bank or financial institution. There are many fraudsters who will try to lure you through text messages or emails with attractive loan offers. Just avoid them.
FAQs
1. What is a pre-approved loan?
A pre-approved loan refers to the offer of a loan sanctioned in-principle by the lender based on your credit profile, which is yet to be verified finally along with its terms.
2. Will it impact my credit score if I ignore a pre-approved loan offer?
No, it will not impact your credit score if you reject the offer or choose to ignore it.
3. Is it necessary to accept the pre-approved loan offer instantly?
No, compare the interest rates and charges along with the terms, and only accept the offer if you actually need the loan.
