18 May 2017, 10:01 — 4 min read
“Your personal loan is approved. Contact us for a quick loan disbursal.”
“Congratulations, you’re pre-approved for a personal loan. A speedy loan disbursal awaits you!”
Do the above words ring a bell? Perhaps you receive a couple of such messages every day in your email inbox or as an SMS on your phone! So, why is there so much buzz about pre-approved personal loans? Should you opt for such a loan if (and when) you need money? Let’s find out!
What are pre-approved personal loans?
Pre-approved personal loans simply mean that a bank, NBFC or other lender has pre-qualified you for a particular loan amount, subject to your meeting their pre-defined eligibility criteria. They evaluate a prospective borrower on the basis of his/ her financial data such as monthly cash flow, or business revenue (in the case of a business entity) and evaluate whether the applicant will be able to pay the loan EMIs comfortably.
However, a pre-approval is no guarantee that the loan will be disbursed to the applicant's account. The final lending decision is subject to fulfillment of all documentation requirements. The loan process is similar to a regular personal loan application, but a pre-approval speeds up the game!
Here are some important facts that you should be aware of vis-à-vis pre-approved loans:
● Time-bound offers
Usually, pre-approved loan offers are available only for a limited period. The interested borrower is required to apply for the personal loan within a certain time limit. The pre-approval is, in reality, an invitation to apply for the loan.
● Documentation is critical
It’s true that pre-approved loans can be obtained faster, but this does not mean that the process requirements are any different from a regular loan. The documentation required is the same in both cases. Missing out even a single essential document may delay or cancel the loan offer.
● Cost implications
As in the case of any other regular loan, the processing fees and other charges (if applicable) have to be borne by the loan applicant.
However, pre-approved personal loans carry many benefits.
Benefits of a pre-approved personal loan
● Faster processing
The time taken for the entire loan process is much less than the conventional one and the loan amount is disbursed very fast. Since the bank/ NBFC itself has indicated your eligibility amount and knows your track record, the process becomes swift and the loan is disbursed quickly.
● Best interest rate
Since the bank/ lender is aware of your capability to repay the personal loan up to a certain amount in time, they’re likely to offer the most competitive interest rates on pre-approved personal loans.
● Room for negotiation
Since the lender has taken the initiative to offer you a personal loan, you can always negotiate the best possible terms and conditions. There is a scope of negotiation to seek the best borrowing opportunities.
While the pre-approved loans can be obtained much faster, one must understand that any kind of debt comes with a responsibility to repay it on time. Not doing so can have negative implications. Don’t just get attracted to well-presented marketing gimmicks. Do your research, weigh your options and then apply for any type of loan; of course, after you understand all relevant terms and conditions!
Fintech lending platforms such as Biz2Credit give you the power to compare personal loan offers that you are eligible for at a few clicks and help you make a smart borrowing move.
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