What is Pre-Approved Personal Loan and How Does it Work?

Are you in urgent requirement of funds and want to avoid the lengthy application process? If yes, then pre-approved personal loans can be your solution because of their quick and convenient process. These are pre-approved loan offers provided by your current lenders/banks based on your creditworthiness. Moreover, your bank may offer lower interest rates than a regular personal loan if you have a good credit history and a decent credit score.

Read this blog to learn about pre-approved personal loans, their application, and the eligibility process.

A pre-approved personal loan is an instant loan offer provided to selected customers by several banks and NBFCs based on their credit history and repayment behaviour. This means you are already eligible for a loan, making the application process significantly faster and smoother. 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. 

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The application process for a pre approved personal loan is quick and easy as compared to the regular loan application process. Here are 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 must fill out and submit the loan application form. You can get the loan application form through the bank’s website, branch office, or mobile banking apps.
• Choose the loan amount and the preferred loan tenure.
• Now upload the necessary documents, such as address proof, ID proof, salary slips/income proof, and the last 3-6 months' bank statements. 
• Once you submit the application form along with the documents, the banks and NBFCs will verify the documents. 

However, it is essential to remember that some banks and NBFCs may ask for additional documents. These include your last three month’s salary slips, employer’s details, KYC details (PAN and Aadhar), and employee ID card.

Since pre-approved loans are offered to existing customers by the banks/NFBCs, you donot need to check your eligibility separately. However, the existing customers might have to do their re-KYC again and submit additional documents for income verification.

Few banks also offer pre-approved loan offers to new customers for which the following eligibility criteria are applicable:

• A clean credit history.
• A good credit score.
• A good track record of repaying loans and debts on time.
• A monthly income source.

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Here are some significant advantages of pre-approved personal loans:

• Quicker Loan Disbursal

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. 

• Minimum Documentation

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

• Competitive Interest Rates

Pre-approved loans are offered to people who have a good credit history. As a result, they are usually offered a lower interest rate on their loan amount as compared to the interest rate charged on regular personal loans.

• Flexible Loan Tenures

Pre-approved personal loans mostly have flexible repayment tenures, ranging from 6 months to 3 years, depending on the loan amount and lender.

Now that we know how pre-approved loans work, let’s look at how a pre-approved loan differs from a regular personal loan.

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 flexible EMIs. However, be aware of interest rates before accepting any pre-approved loan offer. In addition, check the additional fees and charges before signing the application form.

Disclaimer: This blog is solely for educational purposes.