Congratulations! Your pre-approved loan of Rs 3 lakh is waiting for you! Chances are that you might have received such messages quite often and have possibly wondered why you are receiving them in the first place.
Don’t be surprised. Banks are always eager to lend money to safe borrowers with a good credit repayment history. Pre-approved loans also fall in this same criteria. A pre-approved loan is essentially “an offer for a loan” based on your creditworthiness, subject to the fulfilment of certain predetermined terms and conditions.
There are two types of loans – secured, which includes home loans and auto loans; and unsecured – which includes personal loans and credit card loans. Usually, customers who have a long-standing association with the lender tend to get the best pre-approved loans.
For instance, if you have a salary account with a bank for a year or so, the bank may consider you for a pre-approved credit product.
“Such loans are offered to customers who have previously availed of a loan from a lender and have maintained a good track record in repayment . However, do note that before making pre-approved loan offers, the lender thoroughly evaluates the customer’s creditworthiness,” Bajaj Finserv says on its website.
That said, a pre-approval doesn’t necessarily guarantee a loan. It is merely an offer of a loan, and rather an indicator of you eligibility of getting one.
Says Adhil Shetty, CEO, BankBazaar, a financial services website: “You still have to go through all the required procedures that are involved in getting a loan. But the longer the relationship and better your track record in managing the account, the higher will be your chances of being pre-approved.”
That said, a pre-approved loan is still a loan and you would have to repay it with interest , just like for any other loan.
That depends on the pre-approved loan offer. Usually, the processing fees and other charges for a pre-approved loan are the same as that for a regular loan.
However, if the pre-approval is part of a promotional scheme or offer, the bank could offer a discount on the spread of a pre-approved loan or on the processing fee.
A pre-approved personal loan comes with validity for a certain period of time. For home loans, it is usually six months. So, if you are not able to avail of the loan, you stand to lose those benefits. Also, if you do not opt for the loan within the validity period, you will need to pay something extra to have the loan re-approved.
Should you opt for pre-approved loans?
Since the banks have already done a check to determine your loan eligibility before approving the loan, the processing time would be shorter.
Second, since banks are approaching you with a pre-approved loan, you stand a better chance at bargaining for a better rate.
Shetty adds, “Having a pre-approved loan implies that you are a serious buyer, and this gives you an edge with the seller while bargaining for the purchase, whether a home or a car.”
That said, one should refrain from going for unsecured pre-approved loans just because he/she is being offered one, unless there is a pressing need for a loan.
The actual rate of interest that is applicable will be as per prevailing conditions at the time of actual disbursement and not what is stated in the pre-approval intimation. In case of long-term loans, such as a home loan, this could mean a significant sum.
