Getting a loan may seem like an overwhelming task a person has to go through. A neat alternative for those who wish to avoid such hassles is pre-approved loans that help expedite getting the loan disbursal amount and come with competitive interest rates. Moreover, your bank may offer lower interest rates than a regular personal loan if you have a stellar credit history and a decent credit score. Thus, it is efficient to bring down the EMIs without compromising your funding needs. Read on to know more about pre-approved loans.
Banks and other financial institutions provide pre-approved loans to customers with a remarkable credit score and a history of on-time credit repayment. That being said, banks mostly use pre-approved loans as a promotional tool to boost the sales of loan products. These pre-approved loans help customers get loans with minimum documentation. Additionally, such loans have minimal processing time, generally do not require collateral, and have a flexible repayment tenure. The rate of interest offered varies with the bank and is usually between 10.49% p.a. to 14% p.a., depending on your credit history, income, repayment tenure, and other factors. If in doubt, you can check the difference between EMIs of regular and personal loan with the help of an online personal loan EMI calculator.
Below is an overview of the steps to apply for a pre-approved loan:
However, it is important to remember that some banks and even NBFCs may ask for additional documentation. These include your last three-month salary slip, bank account statements, employer’s details, KYC details (PAN and Aadhar), and employee ID card.
Although this is a pre-approved loan, you may still need to fulfil the following criteria to be eligible for a pre-approved loan. The eligibility criteria include:
The maximum limits for pre-approved loans differ for each bank and NBFC. Standardized amount in certain banks like HDFC Bank, SBI Bank, Axis Bank and Bajaj Finserv is up to Rs. 25 lakh. Additionally, certain banks like ICICI offer up to Rs. 50 lakhs as their maximum limit for pre-approved loans.
Now that we know how pre-approved loans work, let’s look at how a pre-approved loan differs from a regular personal loan.
In regular loans, banks mandatorily check and verify whether the loan applicant has a long tenure of employment with adequate salary slips/income proof. On the other hand, pre-approved demand less rigorous assessments. A clean credit history and three months of employment status are all you need to apply for the loan. Customers with no credit history can apply for a pre-approved loan based on income and savings history.
Pre-approved loans involve minimum or no documentation and paperwork for loan approval. However, regular loans call for more scrutiny checks of the borrower, and it is quite a hectic process involving various documentation.
A pre-approved loan is typically disbursed within a few minutes. Contrary to this, a regular loan has a longer disbursal time ranging from a few hours to several days.
Here are some significant benefits of pre-approved loans:
Pre-approved loans are a great choice if you need instant funds to meet urgent financial needs. Once the loan is approved, it will be transferred to your bank account on the same day.
Pre-approved loans are offered to people who have a good credit history. Since lenders trust their financial profiles, they are usually offered a lower interest rate.
You need minimum documentation to process a pre-approved loan because the lender has already analyzed your financial credibility.
Pre-approved loan schemes also have drawbacks, including:
Pre-approved loans have a low validity tenure. Upon loan approval, you need to act fast to avail it or else the deals will be altered or cancelled.
The bank is not liable to credit the loan to you until further verification of your credit score or documentation. While pre-approved means that you are eligible for the loan, it does not guarantee immediate disbursal.
Pre-approved loans are the best option for last-minute loan needs. It is hassle-free, efficient and only requires good financial discipline. The bank also adds extra offers like low-interest rates, processing fee waivers and EMI holidays. Therefore, it is a great and swift way to solve your financial needs. However, be wary of interest rates before accepting any pre-approved loan offer. In addition, check the additional fees and charges before signing the deal.