Pre approved loan
Updated on October 4, 2023
We have often seen emails and messages offering pre-approved loans from many banks and NBFCs. Have you ever wondered why are they offered and what do they mean? Given here are the answers to these questions.
Meaning of Pre-approved Loans
A pre-approved loan, often referred to simply as a pre-approval, is a financial product offered by banks and financial institutions. It’s a conditional approval for a loan amount that a borrower can avail of without undergoing the typical loan application process. Lenders grant pre-approved loans based on the applicant’s financial profile, credit history, and other relevant factors, indicating that the borrower is creditworthy and eligible for a loan up to a specified amount.
What are the prime features of Pre-Approved Loans?
Pre-approved loans offer instant approval with customized terms and competitive interest rates. They often require no collateral, provide flexible repayment options, and have minimal processing time due to reduced paperwork. However, accepting a pre-approved loan can impact one’s credit score, and these loans typically come with shorter tenures and predetermined loan amounts. Final approval is conditional upon verification and documentation.
What are the benefits of pre-approved loans?
Saves Time – Pre-approved loans save borrowers time and effort, as they eliminate the need for a lengthy loan application process, credit checks, and documentation submission.
Negotiation Power – Borrowers can negotiate better terms with the lender, such as interest rates, repayment tenure, and loan amount, as they have already demonstrated their creditworthiness.
Financial Planning – Pre-approvals enable borrowers to plan their financial goals with more certainty, knowing the maximum loan amount they can access.
Quick Access to Funds – In cases of urgent financial needs, pre-approved loans offer a faster route to accessing funds compared to a standard loan application.