All You Need to Know About Pre-Approved Personal Loans

When you think about a pre-approved Personal Loan, does the term sound familiar to you, like you’ve heard it somewhere? It’s not surprising if you have. You’d most likely have received an SMS or E-Mail from your bank congratulating you on your eligibility for a pre-approved Personal Loan, or you would have seen a promotional message while logging into your net-banking portal. Most of the time, there’s even a question that pops up on the ATM screen, asking you if you'd be interested in a pre-approved Personal Loan, right after having made a withdrawal or any other transaction. So the question is, what makes pre-approved Personal Loans so important, and why are we constantly being pushed to apply for one?

The one thing that sets a pre-approved Personal Loan from any other ordinary loan is the fact that they are almost always offered only to those customers who have a good credit record, who are creditworthy, and with a sound financial standing. So, if you’ve been told that you’re eligible for a pre-approved loan, it most definitely means that your bank has already checked the following information pertaining to you:

1. Your account balance
2. The payment history for your debit/credit cards (if any) up until now, and most importantly,
3. Your CIBIL or credit score

Only if all these factors are proper, and support the fact that you have a good financial standing, will any bank consider you for a pre-approved loan. And as for the answer to why all the banks are pushing us to take one, well, it’s pretty simple! Every bank branch has sales targets in terms of loans and various other products that they have to meet every month. So, it’s no surprise that bankers try and cross-sell various types of loans to us, or that our inbox is flooded with SMSes practically begging us to take such pre-approved Personal Loans.

So now that you that you know what the big deal is, you might probably be thinking that if you were to apply for one, you’d get it immediately (because it’s pre-approved), right? Wrong. Even if they are after you to avail a pre-approved loan, your banker is under no obligation to absolutely give you any loan. Nope, the “pre-approved” in a pre-approved Personal Loan only means that you are short-listed for that loan, and given first preference over other customers. You might even get the loan, should you choose to go ahead and apply for one, but that’s all. It doesn’t mean that the approval process is over and that you are guaranteed to get it.

(Also, such pre-approved Personal Loans come packed with terms and conditions that are not immediately disclosed to the customer when they apply for one. Therefore, it makes sense to read all terms and conditions carefully if you choose to avail one.)

So, are there any advantages or disadvantages to availing a pre-approved Personal Loan?  Of course, yes!

Advantages:

1. Reduced Processing Time: This is a great advantage because if you’re eligible for a pre-approved Personal Loan because it means that you’ve already met the bank’s lending criteria. On top of this, if you already have a good relationship with your bank, chances are that the loan may get approved and disbursed much faster, in a couple of days for instance.
2. Open to Negotiation: In this case, you have more power to bargain and room to negotiate with the bank in terms of the tenure, loan amount, interest rates, and the terms of your Personal Loan. This is because, contrary to previous scenarios, here, the bank is after you to take a loan, and it’s not you who is requesting for one.
3. Discounts and Waivers: Pre-approved Personal Loans normally come with special discounts on your EMIs, waivers on your charges and fees, and other such advantages, because, as stated earlier, it is the bank here who needs you to take the loan more than you do.

Disadvantages:

1. Validity Period: Such offers for re-approved Personal Loans are normally only valid for a specific time period. If you’re eligible for one, you’ve got to avail it in that specific period or you might lose out on the offer.
2. No Guarantee on the Loan: As stated earlier, a pre-approved loan does not come with a guarantee that you will definitely get it. The bank is not obligated to lend you the amount and can close or remove the offer anytime.
3. Hidden fees, terms, and conditions: Keep an eye out for hidden fees, charges, terms, and condition if you choose to go ahead with a pre-approved Personal Loan. There are sure to be many of them, most of which is ordinarily not disclosed to the customer at the time of application.

Most importantly, as tempting as it may sound, it is inadvisable to apply for an Instant Personal Loan, pre-approved or not, if you don’t really need it. Applying for a pre-approved loan ‘just to see if you’ll get it’ is not a great idea, and you might end up borrowing money that you don’t even need.