How do Pre Approved Personal Loans Work?

How to Apply for a Pre-approved Loan?

Below is an overview of the steps to apply for a pre-approved loan:

• Check with your bank if you are eligible for a pre-approved loan. You can also log in to your net banking account to check your eligibility for a pre-approved loan.
  
  
• Next, you will need to fill out and submit a loan application form. The forms are usually available on the bank’s website, branch office, or mobile apps or requested via SMS.
  
  
• Choose the amount for your loan and a convenient tenure of repayment.
  
  
• The loan amount will be transferred to your bank account once the bank completes the verification process.

However, it is essential to remember that some banks and 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.

Eligibility Criteria

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 following: 

• A clean credit history
• A good track record of repaying loans and debts on time.
• An existing customer of the bank you are applying for the pre-approved loan. Certain banks also consider new customers.

What is the Maximum Limit on a Pre-approved Personal Loan?

The maximum limits for pre-approved loans differ for each bank and NBFC. The standardized amount in certain banks like HDFC Bank, SBI Bank, Axis Bank and Bajaj Finserv is up to Rs. 25 lakhs.

Additionally, certain banks like ICICI offer up to Rs. 50 lakhs as their maximum limit for pre-approved loans.

Differences Between Pre-approved and Regular Personal 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.

• Eligibility

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.

• Documentation

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 a pretty hectic process involving various documentation.

• Loan Disbursal

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.

▶️ You may also want to know How to Get a Personal Loan in Easy Steps

Advantages of Pre-approved Loans

Here are some significant benefits of pre-approved loans:

• Quick Funding

Pre-approved loans are great 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. 

• Competitive Interest Rates

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.

• Minimum Documentation

You need minimum documentation to process a pre-approved loan because the lender has already analyzed your financial credibility.

Disadvantages of Pre-approved Loans

Pre-approved loan schemes also have drawbacks, including:

• Low Validity

Pre-approved loans have a low validity tenure. Upon loan approval, you need to act fast to avail of it, or the deals will be altered or cancelled.

• Bank’s Discretion

The bank is not liable to credit the loan until your credit score or documentation is further verified.

While pre-approved means you are eligible for the loan, it does not guarantee immediate disbursal.

The Bottom Line

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, solving your financial needs is a great and swift way. 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.