Personal loans are everywhere. At present, it is hard to find a lender who does not offer a personal loan.
The popularity of personal loans can be attributed to various reasons.
Firstly, a personal loan is unsecured, which means you can get the money without submitting collateral. Secondly, personal loan interest rates are much lower than other unsecured options. You may also use the personal loan EMI calculator for free to get a proper estimate. Thirdly, many lenders offer the facility of pre-approved loans, which makes the process of loan application much simpler.
But, what is unique about a pre-approved personal loan? Read on to know more.
What is a Pre-Approved Personal Loan?
A personal loan is a unique type of unsecured loan, which does not require a mortgage. Generally, when you need money, you can download the lender’s app or visit their office in person, use the personal loan EMI calculator to calculate the repayment liability, and place a loan request. The lender evaluates your eligibility criteria, verifies your documents, and approves the loan.
In the case of a pre-approved personal loan, the lender evaluates your credit profile, income, liabilities, and creditworthiness in advance, and decides the loan amount you are eligible for. The biggest benefit of a pre-approved personal loan is that you do not need to calculate your eligibility, as the lender has automatically done it for you. Hence, it is best suited when you need cash instantly. Generally, only those borrowers are eligible to get a pre-approved loan who have an existing relationship with the lender.
What are the Criteria for Selection?
Quite often, when borrowers get to know that they have been selected to receive a pre-approved loan, they wonder why they received the message. The reasons are simple.
The lender may pre-approve your loan if you have a robust credit profile and a strong repayment history. They may also consider you suitable if your debt to income ratio is exceptionally low.
Does Pre-Approval Mean Loan Approval?
While the term pre-approved loan seems self-explanatory, it is not always so simple. By offering you a pre-approved loan, the lender is in no way guaranteeing the loan approval. Instead, what it means is that you can save a lot of time as the lender has already verified your credit profile and know that you have never been a defaulter.
To get the pre-approved loan, you would still need to submit a few essential documents, like PAN Card, address proof, income statement, IT returns, bank account statement, and processing fee.
What are the Key Advantages of a Pre-Approved Loan?
A pre-approved loan offers several distinct advantages that no other loans provide.
Firstly, you will have the upper hand, as the bank requested you to apply for the loan. You may easily negotiate about the interest rates, loan terms, loan amount, prepayment issues, etc.
Secondly, by availing a pre-approved loan, you save precious time, as the lender has already completed the first round of verification.
Thirdly, the chances are high that the lender would offer a lower than average interest rate in case of a pre-approved loan.
Fourthly, you can get additional benefits like lower EMIs, fee waivers, free prepayment, and so on.
What are the Disadvantages of a Pre-Approved Personal Loan?
Despite the several benefits that pre-approved personal loan offers, there are some disadvantages.
Firstly, it may lead you to overspend. At times, you might not need something; but the lure of easy money may prompt you to spend on something you could easily do without.
Secondly, pre-approved loan offers typically come with a time limit. Hence, if you overlook, you may easily miss the offer.
Thirdly, there is no guarantee that the loan would still be approved. Approval depends on the successful verification of documents and eligibility.
Fourthly, the interest rate offered by the lender might be still higher than other lenders providing personal loans.
A pre-approved personal loan can be a life-saver when you are facing a cash crunch. Ensure that you use the personal loan EMI calculator before signing on the dotted lines.