Most of you may have come across pre-approved personal loans offers either through SMS, calls or emails on our mobile phones. These offers seem a lot attractive with a lower rate of personal loan interest rate and other benefits like minimal documents. Should you opt for it? Should you consider other options for borrowing?
Here is everything you need to know about pre-approved personal loans:
What is a pre-approved personal loan?
A pre-approved personal loan, provided by banks and non-banking financial institutions is a kind of personal loan that is offered to the existing customers who have good creditworthiness and have repaid their credit on time. These loans are provided with predetermined loan amount and tenure.
Features & Benefits of pre-approved personal loans:
- Rate of Interest: As the financial institutions have approached you for pre-approved personal loan offers, they provide you loans at a lower rate of interest. However, this does not mean that you should take the loans at the rates that the bank is offering to you. You must compare rates of top lenders in the market before agreeing for the loan terms and conditions.
- Minimum documentation: Pre-approved personal loans are provided to the existing customers; thus, banks are already aware of your income and repaying capabilities. Therefore, you may need to offer minimum documents for identity and address proof. However, in a lot of instances, banks may also provide pre-approved personal loans to new customers. In all such instances, borrowers may need to submit the following documents.
- Identity proof
- Address proof
- Aadhar card
- Bank statements for the last six months
- Salary slips for the last months
- Online Application: One of the most significant advantages of pre-approved personal loans is that these loans are processed very quickly, unlike a regular personal loan. Borrowers can apply for a personal loan online through the bank website or mobile application. Also, as the banks are already familiar with the credit history of the borrower, thus the application may be approved in a few minutes. Also, after the approval of your loans, the funds are transferred to your bank accounts instantly.
- Flexibility: There are no restrictions on the end-use of pre-approved personal loans. A pre-approved personal loan can be used for personal and business use such as marriage, any health emergency, business operations etc. Borrowers can also negotiate with the bank for pre-approved rates.
Who are eligible for pre-approved personal loans?
- Having a good credit history and repaying the credit on time means your chances of approval of pre-approved personal loans are higher.
- In case your credit history isn’t that good, but the minimum balance in your accounts is above the specified limits of the banks, then they may consider you for pre-approved personal loan offers.
- Maintaining a good debt-income ratio also makes the borrowers eligible for pre-approved personal loan offers. Thus, the borrowers having regular sources of income may be considered by the bank
- If the new customers have a good credit history, repayment record and balance in their account, they may be viewed by banks for pre-approved personal loan offers.
Does being approved for a pre-approved personal loan means you have availed loan?
If you are pre-approved for a loan offer, then still banks may reject your loan application if the documents are not verified successfully. Thus, while submitting the loan application form, you must ensure that all the details are provided correctly, and also you have submitted the correct documents.Conclusion: Thus, even if you are pre-approved for a loan, you must carefully check all the costs associated with the loan. Along with that, don’t forget to check processing fees, pre-closure and foreclosure charges related to the loan.