Wondering what is that pre-approved offer that your bank reps keep offering you? Here’s all you need to know about pre-approved loans.
You would have often got calls or SMSes from bank executives or pesky telemarketers stating that you’re eligible for a pre-approved Personal Loan. You would have also seen the same message pop-up on ATM kiosks after you’ve withdrawn money or checked your balance. You would have seen the same when you log in to your bank’s net banking portal too. Right? These are actually promotional activities carried out by the banks to push pre-approved loans and increase their loan sales.
So, what exactly is a pre-approved Personal Loan? You already know what a Personal Loan is, right? If you don’t, then here goes – A Personal Loan is basically a type of unsecured loan which you can avail from banks or Non-Banking Financial Companies (NBFCs) without having to provide any collateral or security.
The biggest advantage of a Personal Loan is that you can use it for any purpose (although we would advise against lavish use of it) and no questions will be asked about the same. Ideally, most people opt for a Personal Loan to cater to sudden personal expenses such as loss of one’s job, a medical emergency or to consolidate their debts. Simple documentation and quick disbursals have made Personal Loans the most preferred choice of loans when in dire need of money.
Additional Reading: Paperless Personal Loans Are Here!
A pre-approved loan is often an offer by banks to customers who have a clean credit record. The bank carries out an initial analysis of the financial standing and credibility of an individual and then decides on offering such a loan to them. The track record is checked in clearing old dues and repayment of existing loans. So, if you’ve been clearing your Credit Card or other loan dues without fail month after month, you are likely to be offered a pre-approved loan.
Additional Reading: Pre-approved home loan advantages!
Reasons Why You May Have Been Chosen For A Pre-Approved Offer
There are quite a few reasons why banks consider someone eligible for a pre-approved offer. Here are a few of them:
- A good Credit Score and credit history. Psst! Check if you have a good Credit Score for FREE now
- You have been paying your loan/Credit Card dues with your bank religiously
- Bank may have checked your income and expenses and found you eligible
- Banks find you a credit-worthy individual
- You have saved up a good amount of money in your Savings Account and your bank knows this
How Do You Get The Pre-Approved Personal Loan?
Remember that pre-approval does not necessarily mean that the bank is now bound to give you the loan. There will be quite a few formalities which need to be fulfilled prior to the actual disbursement of the loan.
The procedure followed for a pre-approved loan is similar to any other Personal Loan and you’ll have to submit relevant documents in order to avail the loan. The processing time, in this case, maybe lower as the bank has already done a credit check and considers you a credit-worthy individual.
Since pre-approved offers are usually made by banks with which you already have a relationship, they wouldn’t require many documents. However, it is wise to keep the following handy if you’re looking to avail a loan:
- Salary slips – 3 months at least
- Bank statements
- ID proof
- Residence proof
- PAN card
Additional reading: Personal Loan Handbook: All Questions Answered
What Are The Benefits Of Getting A Pre-Approved Loan?
As a customer, if you opt for a pre-approved loan, you can enjoy quite a few benefits. Here are a few:
- Increased bargaining power since it is the bank that wants you to take a loan without you requesting for one. You’ll be able to negotiate loan terms and reduce the interest rate, extend the tenure, increase the loan amount, etc.
- One of the biggest advantages of a pre-approved loan is the reduced processing time. If you’re eligible for a pre-approved offer, it means that you have already met the lender’s eligibility criteria. Plus, since you would already have an active relationship with the bank, there wouldn’t be much scrutiny involved. If you’re lucky enough, your loan may get approved and disbursed in a day or two.
- There is a possibility that your pre-approved offer may come at a lower interest rate than the usual Personal Loan offers as the bank is trying to push its products to meet its targets.
- This is a great tool to get some additional funds in times of urgent requirements and comes with the convenience of repaying through easy EMIs.
- And if you actually need a Personal Loan, going for the pre-approved offer makes sense as you’ll surely get special discounts such as EMI advantages, processing fee waivers, part-payment options, etc.
Are There Any Disadvantages?
Of course, a pre-approved loan offer is indeed a sweet financial deal. But it surely isn’t devoid of disadvantages. Often people get tempted to avail such pre-approved Personal Loans and end up spending unnecessarily on things that they could have easily done without. So, avail such offers only if you have a necessity and not because of the perks or discounts attached with the offer. Here are a few disadvantages of pre-approved offers:
- These offers are time-bound. So, if you really want a pre-approved loan, you’ll have to apply for it before the offer expires.
- Your bank may have made you a pre-approved offer, but it is not bound to sanction the loan to you. At any time, the bank can choose to revoke the offer.
- There are chances that the interest rate offered is higher than the market rate. So, always make sure that you’re aware of the market trends.
- Before you agree to the terms and conditions, keep a watchful eye on the fees and charges associated with the loan offer. Or you’ll just regret later!
Additional Reading: Possible Risks Of Unsecured Personal Loans
Just Summing Up
A pre-approved loan offer is basically a bank’s attempt at cross-selling other products based on the information they have about any product(s) you hold with them. The loan offer is usually made based on the bank’s evaluation of your repayment capacity, but they will lend only after they validate their assessment.
With BankBazaar, you can check if you have any pre-approved Personal Loan offers or just hunt for a Personal Loan or any other financial product under one roof and within the comfort of your home.