How to nail a pre-approved loan offer

Such loan understandably come with different terms and conditions those need careful scrutiny before going for one. Besides, to get a pre-approved loan, you need to follow the loan process completely. The lending criteria are completely based on the risk appetite of the bank and the information received by the borrower. Here’s a read to give you all such related information. 

Subas Tiwari

Generally, a pre-approved loan is based on your credit rating. Every bank/NBFC offers such loans to the common people on the basis of their set terms and conditions. There can be pre-approved loan offers in the form of car, home, personal and credit card loan etc.

But know that everyone is not eligible to get a pre-approved loan offer. Banks/NBFCs take stock of your financial condition before offering this loan. Or they estimate it on the basis of your transaction and credit score. Banks estimate your loan repayment ability based on your old credit card payments and other transactions. Pre-approved loans are offered to you if your financial condition and your credit score is good.

Note that 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. Given below could be a few: 

  • 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.

What is the loan process?

The pre-approved loan process is almost similar to other loans. Before sanctioning loan, banks collect some simple yet important information. As in the case of a home loan, your property is also assessed. Having a pre-approved loan offer indicates your better ability to repay the loan. This means that the bank already has an idea about your financial condition and credit score.

Features of pre-approved 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. 
  • 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.

What are the benefits of a pre-approved loan?

As the bank already has information about the financial condition of the borrower, one can expect quick loan approval from the bank. After this only the appraisal work of your property remains.

The pre-approved loan offer is usually based on the prevailing interest rates in the market. This means that you will be able to get the same loan at lower interest. With this you will have to pay less EMI and there will be less burden on your pocket.

  • Instant funds or quick funding: Being eligible for pre-approved loans makes it a safety net 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. 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.

Which documents are required?

A complete paper verification is required before the loan borrower is issued a pre-approved loan. For a pre-approved loan, certain documents are required to be submitted. These include identity proof, residence proof, PAN card, bank account statement of the last 6 months and income tax return information for the last three years, etc.

It is important to read the terms and conditions properly

Pre-approved loans are not offered to people declared defaulters with Civil Score or other banks. A pre-approved loan is always subject to terms and conditions and there is no guarantee that you will get it.

How to apply for pre-approved loan?

  • 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.
  • Submit a duly-filled loan application form which can be obtained from the lender’s website, branch office, through SMS, or mobile app.
  • Choose the required loan amount and suitable repayment tenure.
  • 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 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 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 per cent 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.

 

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