Is Pre-Approved Personal Loan, Fact or Fallacy?
August 1, 2023

While checking her Bank statement, Sonia was delighted to read, “You have a Personal Loan offer for ₹ 2 Lakhs“. It was precisely the stroke of luck she needed, as she was planning an overseas vacation with her friends and required additional funds.

She contacted her Bank and requested the credit of the loan amount on account of the pre-approved offer surprisingly, the Bank asked for her documents and application to initiate the process.

In another instance, Mohit was offered a paperless, instant loan of ₹ 5 lakhs on behalf of his payment App; on pursuing the offer, he was asked to submit documents before obtaining the Loan.

Are these offers for real? What does the fine print say about these funding techniques? Let’s find out.

How Do Financers Initiate a Proposal For a Pre-Approved Loan?

In today’s sales world, Data is the key, and targeting the appropriate audience is crucial for achieving a successful sale.

Financial institutions such as Banks and NBFC have extensive data on customers using their services: as submitting KYC details for opening a Bank account or securing credit has become mandatory.

Therefore, financers can easily reach out to customers via SMS, send emails and messages, or display the details of a Pre-approval on a mobile app screen.

Banks and NBFC also employ Tele callers to call customers for a pre-approved loan or display the message on the online banking platform.

Who Qualifies For a Pre-Approved Personal Loan Offer?

A pre-approval for a Personal Loan is not randomly forwarded it is a system-generated offer. Leading Banks such as HDFC Bank, ICICI Bank, YES Bank, and AXIS Bank deliver offers to candidates holding a Bank Account and having the following qualifications:

  • The vintage of the account should be 12 months or more with regular credits as a monthly salary, deposits from sales or professional or business earnings.
  • A healthy bank balance is maintained, demonstrating that the individual lives well within their monthly income and has funds to spare. Therefore, can easily afford to pay for additional expenses.
  • All cheques and instalments are honoured with no returns or bounces.
  • Additionally, a Deposit scheme maintained is a cover for giving further credit.
  • Unlike a formal loan application, which triggers a hard credit inquiry and may impact your credit score, pre-approval generally involves a soft credit check. This soft inquiry allows the Lender to review your credit history without leaving a lasting mark on your credit report. Suppose the score is above the required benchmark, that case. In that case, such individuals will most likely receive a Pre-approved offer for a Personal Loan.

Should I Accept a Pre-Approved Personal Loan Offer?

After receiving the pre-approval offer, you can decide whether to accept it. Remember that a pre-approval is not a guarantee of funding but rather an indication that you are likely to be approved for a loan based on the information available at the time. Listed below are considerations for making a decision:

Do you need the funds at this time?

Receiving the funds without an objective is of no use. The financer has forwarded you the offer but accepting funds without any active need serves no purpose.

Do you have the capacity to afford the extra EMI? 

How are you currently placed financially, will the repayment of the loan burden you? Use our EMI Calculator to determine your monthly instalment. Once the Bank disburses the amount, you must pay the EMI on time.

Are you eligible for the Loan? 

The financer extends a pre-approved loan offer based on preliminary checks and a customer’s creditworthiness. On applying for the Loan, the Bank processes the request per the regular norms. It only accepts the application that meets the Eligibility Criteria. Check the terms on our link before applying.

Have you taken other credit recently?

Suppose you have received credit recently from other financers. In that case, the Lender can deny the request even if it is pre-approved. The CIBIL Score and history review should not reflect any delays or settlements. Rejection will always show in your history, so be sure before applying.

Offer on A financial App

Financial Apps are indirect sourcing platforms for some lenders the App redirects the loan offer to the financer advertising on the App. The financer further processes the request per individual norms, terms and conditions. So, applying through an App is not the best deal.

What are the advantages of a Pre-approved Personal loan?

On the other hand, a Pre-approval the Bank issues is with a check on the essential criteria. Furthering the Personal Loan has its benefits.

  • Create or Increase your CIBIL score If this is the first time you have appended credit, now is the time. With an unsecured Personal loan repayment for six months, the CIBIL generates a score. A healthy credit score will enable you to get further credit when required at suitable terms.
  • Unpaid Credit Card dues have an interest of 36% per annum use a Personal Loan to clear your credit card bill. A Personal Loan interest rate is 12% per annum, repaid in easy instalments.
  • If you need funds shortly, avail your present Pre-approved Personal Loan. This facility can expire soon, funding may only be available sometimes when required, and the terms and conditions may need to be more attractive.

How to process a Pre-approved Personal Loan?

Here are the stages involved in getting a pre-approved personal loan:

  • Contact the Lender for the terms of the pre-approved Loan for confirmation, such as:
  • The Loan Amount.
  • The interest rate.
  • The processing fees.
  • Collect the required Documents for a new loan and submit a formal application.
  • At this stage, the Bank will look at your credit score, income, debt-to-income ratio, employment history, and other factors to determine the profile.
  • If it meets their requirements, the Lender will Conduct due diligence in residence and office verification.
  • The file will move to the underwriter, who will decide on the request and confirm the terms of the Loan.
  • If suitable, the customer signs the agreement the Loan amount approved is transferred electronically to the salary account of the applicant.

In Conclusion

Unsecured credit, such as a Personal Loan, is a good investment that helps to build a credit score speedily and inculcates discipline for the management of credit.

Before accepting a Pre-Approved Personal Loan, review other Lenders’ offerings for their terms. Finally, if the offer is approved once you have received the Loan, remember to pay the EMI on time.


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