What is a pre-approved personal loan?

How many of you have received a call claiming that you have a pre-approved personal loan of X amount? Hope most of you get this kind of call…

Most of you feel excited once you get the confirmation about your pre-approved loan, but not many of you know everything about it. Before you grant your approval for the pre-approved personal loan, it's essential to know the nitty-gritty of the personal loan that will help you make the right decision.

This article will give you detailed information about pre-approved personal loans.

Numerous people across the country need emergency funds to settle their financial troubles. A personal loan comes as a boon for such individuals. You can get an instant loan with a low-interest rate based on your credit score.

What is a Pre-approved Personal Loan?

As the name suggests, a pre-approved personal loan is a loan that is approved for specific individuals with good credit ratings. Banks/lenders always sort the candidates with good credit scores and offer them low-interest rate personal loans with less or without any documentation.

Such loans are pre-approved by the bank and NBFC’s, making them quick and easy to disburse. A pre-approved personal loan is also a good practice to boost the sales of loan products. These pre-approved loans come with minimal (even zero) documentation, as most of the credit checks are already done by the bank before offering you the desired personal loan.

A personal loan comes with no collateral need, making it a flexible and most feasible option to meet your financial needs without looking elsewhere.

Based on your credit history, you can get a personal loan with an interest rate ranging from 10% to 15%. You can easily calculate the personal loan EMI with multiple online EMI calculators offering the principal amount, tenure, and interest rate.

Let's take a look at how a pre-approved personal loan works.

How can you apply for a pre-approved loan?

If you are looking for a personal loan and are searching for pre-approved opportunities, the below-listed steps can help you get one.

• Reach your bank to ask whether you qualify for any pre-approved loan. You can also login via net banking and check the available offers on personal loans.
• If you have one, fill out the document and submit your loan request. You can either call the bank customer care to proceed with the loan application or get it from the official website.
• Usually, customer care representatives reach you with the requirements, including loan amount, tenure, and other loan-related information.
• Post documentation, the loan amount will be disbursed to your bank account.

There are cases when the bank/lender may ask you for a guarantor or additional documents, including your three-month salary slip, bank statement (usually 6 months), PAN number, employee ID card, etc.

What's the Eligibility for a Pre-approved Personal Loan?

Usually, pre-approved loans are offered to individuals with good credit history, yet you must know what other factors qualify you for the pre-approved loan.

Below are the prime factors that result in a personal loan pre-approval.

• A good credit history
• A good track record of repaying loans and debts.
• An existing customer with multiple credit facilities (credit card, home loan, etc.)

What's the maximum limit of a Pre-approved Personal Loan?

Most banks, including SBI, HDFC, Axis, etc., provide you with a maximum personal loan of Rs. 25 lakh. Interestingly, ICICI bank offers a pre-approved personal loan up to Rs. 50 lakh. However, what amount you qualify, differs based on the abovementioned factors. You may get different limits for personal loans from different banks.

How is a Regular Personal Loan Different from a Pre-approved Personal Loan?

Before you proceed with your pre-approved loan, it's crucial to know the difference between a pre-approved personal loan and a regular personal loan.

Let's discuss their differences based on different parameters.

Eligibility: In a regular personal loan, the borrower is thoroughly checked to have a strong credit report. They must have adequate proof to proceed with the loan procedure. However, with pre-approved loans, the eligibility is already checked before offering a personal loan. Even if you have no credit history, you can apply for a pre-approved personal loan based on your income and saving history.

Documentation: The procedure for regular personal loans starts from scratch. It means it involves a few documents and paperwork. However, a pre-approved personal loan comes with minimal or zero paperwork. Nowadays, most banks offer you pre-approved loans with zero paperwork and zero documentation. In short, the pre-approved personal loan is less hectic compared to a regular personal loan.

Loan Application Time: A regular personal loan takes time as it involves documentation, a few credit history checks, etc. On the other hand, pre-approved loans are quick to approve.

What are the advantages of a Pre-approved Personal loan?

Undoubtedly, a personal loan has multiple benefits you must know before taking any offer. Below are the advantages of taking a pre-approved personal loan.

Quick Loan Disbursal: As mentioned earlier, your personal loan is disbursed without any documentation or paperwork. This saves your time and transfers the loan amount in a shorter period.

Competitive Interest rates: Usually, pe-approved loans are offered with competitive interest rates that make them fascinating. This is because lenders trust their credit profile and offer existing interest rates.

No Documentation: Pre-approved loans include prior credit checks that lessen the loan processing time. Moreover, pre-approved loans come with zero documentation and paperwork. This results in zero efforts in getting a personal loan and tackling emergencies.

These benefits don't mean pre-approved loans are a golden opportunity for you. Like two faces of a coin, personal loans also have a few disadvantages you must consider before making decisions. Below listed are the disadvantages of taking a pre-approved personal loan.

• Require Quick Decision: Pre-approved loans and offers are always available for a limited time frame. Hence, you should always be prepared to take such an opportunity and submit your approval for the pre-approved loan. Else, the offer will end, and you won't get the benefits of a pre-approved personal loan.
• Bank's Discretion: You must note that getting a call for a pre-approved loan only tells you that you are eligible to get a pre-approved loan. However, it doesn't guarantee immediate disbursal.

This gives you adequate knowledge about getting a pre-approved loan. However, there are a few myths associated with a pre-approved loan that you must know before considering it.

Personal Loans are Only Offered by Banks: It's wrong that only banks can offer you pre-approved personal loans. Instead, numerous private lenders are also authorized to offer you various credit facilities. You can make a selection based on your requirements and available offers.

No Credit Means No Personal Loan: Numerous professionals are there who qualify for a pre-approved loan but have no credit history. Their stable income and handsome salary make them eligible for a personal loan. Hence, no credit history won't make any impact on the personal loan.

You Can't get a Personal Loan with an Ongoing Loan: Many of you think getting a personal loan is tough if you already have an ongoing loan. However, it's completely wrong, as your ongoing loan won't impact your personal loan eligibility until you have enough debt-to-income ratio.

Personal Loan requires Collateral: The biggest advantage of a pre-approved personal loan is that it comes with no collateral need. It means you don't need a guarantor or collateral for personal loan approval. You can easily get a personal loan, making it a smart option to get quick funds in an emergency.

NOTE: In some cases banks may ask for past salary slip or a guarantor if they aren't satisfied with your credit history.

Personal Loan is Only Available for Salaried Persons: No, anyone with a good credit history and handsome income can qualify for a pre-approved personal loan. Your good credit history can qualify you for a personal loan regardless of your profession. However, the loan limit and interest rate vary based on your credit history.

That said, you now have sound knowledge about pre-approved personal loans. If you are ready to make a smart move with a pre-approved personal loan, you must consider a few pointers to help you make the right decision.

Short Repayment Tenure: Personal loans come with a small repayment tenure. Hence you must be financially prepared to repay it without any delay. Skipping its payment will add a red mark to your credit report and affect your financial journey.

Pre-payment & Pre-closure Charges: These pre-approved loans also have some pre-payment and pre-closure charges that you must know when proceeding with the procedure. You must check these charges alongside other associated charges that might affect your decision.

Search for Zero Processing Fees: With increased competition, you can easily find a lender/bank offering pre-approved loans with zero processing fees. Getting a personal loan with zero processing fees will save you significantly.

Check for Interest Rates: No two banks can give you the same offer on your personal loan request. Hence, you should always compare different banks for pre-approved personal loans.

So, what are you waiting for? Make a wise decision and choose a pre-approved personal loan to settle your emergencies.