Are Pre-Approved Loans Worth It?
• July 27, 2024
You’ve certainly received a message in the past week congratulating you on your qualification for a pre-approved loan. So, what is it? And why did you receive such a message when you don’t remember applying for one or even thought about applying for one? Let’s talk about this.
Pre-approved loans are unsecured personal loans offered by banks or NBFCs (non-banking financial corporations) to select customers. You are one such customer if you have a good relationship with the bank and have creditworthiness.
Normally, you would approach the bank for a loan. However, in the case of pre-approved loans, the bank approaches you with a loan offer.
Usually, it is too good an offer to pass. However, is it one of those too-good-to-be-true scenarios, or is there merit to these loans?
It’s worth noting that having a pre-approval doesn’t guarantee an instant loan if you fail to meet the bank’s approval conditions.
Apart from promoting its loan to meet targets, a bank can also offer you a pre-approved loan for the following reasons:
- You are considered a ‘valuable customer’ because of a high credit score
- Your bank balances and transactions are healthy
- You may have availed a loan in the past and repaid it promptly and on time
- You have a good relationship with the bank as a loyal customer for a long time
How Does Pre-approval Benefit You?
- The loan amount is processed and disbursed on the same day after approval.
- Since you have a pre-qualification for the loan, the banks will ask for minimum documentation.
- Pre-approved loans are unsecured and, hence, need no collateral.
- The interest rates are competitive.
- You can choose a loan period that works for you.
- You are in a favourable position to negotiate terms of the loan offer, like the interest rates and repayment period.
Things to Know about Pre-Approved Loans
- The loan will be available to accept only briefly before the offer is revoked.
- Inquire about processing fees and negotiate with the bank to waive them.
- Try applying for other loans, compare, and select.
- Ask the bank about the charges associated with repaying early.
- Read the fine print in the loan offer. Ensure you inquire about additional charges or fees.
- Pre-approved loans are not guaranteed, although you have a pre-approval. The lenders will assess your application and verify the documents before approving the loan.
Are Pre-approved Loans Worth It?
You should avail of these loans only if you are in a financial crutch at that point in time. Pre-approved loans are also pushed by banks and NBFCs as promotions. Therefore, you should always visit various online platforms to compare if the offer you’ve received is worth it. Even if the banks offer a good deal, take only the amount you require, not the entire amount they offer.
Final Thoughts
Most pre-approved loan offers can be ignored if you do not need them. Even so, pre-qualification doesn’t necessarily guarantee loan approval if you don’t meet the bank’s criteria. That being said, if you do need a short-term loan, take advantage of the loan offer and negotiate better terms.
Remember to take only as much as required, although you are offered a higher amount. And like all other loans, read the loan offer carefully.
As a general rule, maintain a strong credit score for better loan offers and higher credit card limits. In the end, be responsible and mindful in your financial journey to enjoy the perks associated with creditworthiness.
Frequently Asked Questions
What are pre-approved loans?
What are the prerequisites for pre-approved loans?
Is there any benefit to pre-approved loans?
What is the available acceptance period for pre-approved loans?
Am I guaranteed to receive the loan amount because of my pre-approval?