It’s not uncommon to get promotional or marketing calls from financial companies, asking if you are interested in taking a loan, but some of these may be genuine pre-approved loans bring offered by your bank.
This kind of loan is usually given out to a select group of customers. These customers are, typically, very responsible debt-payers who have a strong credit history. Like the name suggests, these loans or credit lines are pre-approved by lenders or lending platforms. The pre-approval is based on the review of the credit history and financial health of the customer.
So if you are looking to take a personal or car loan, it makes sense to check with your lender if you are eligible for a pre-approved loan. “Pre-approved loans help maintain liquidity while taking care of immediate expenses. Unlike other traditional loans, they do not require any collateral,” says Satyam Kumar, CEO and co-founder of LoanTap, a digital lending platform.
A number of banks such as SBI, ICICI Bank, HDFC Bank, IDFC First Bank and Aditya Birla Capital, offer pre-approved loans. Some non-banking financial companies (NBFCs) also offer pre-approved loans.
How Do Pre-Approved Loans Work?
In pre-approved loans, interest is charged only on the amount used by the customer and not the eligible credit limit. “The customer may use part of the credit limit available based on requirement and will still have access to the remaining amount, if required. It allows customers to customise their EMIs thereby addressing their financial needs,” says Kumar.
Benefits Of Pre-Approved Loans
Competitive interest rates: If you’ve been disciplined with your finances, and managed to maintain a good credit history, the lender might offer you a competitive interest rate as you don’t fall under lender-risk/credit-risk category.
Flexible tenure: The loan tenure for such loans is usually 12 to 60 months. Choose your repayment tenure intelligently, so that you don’t default on the loan or pay too much interest.
Minimal documentation: Existing customers do not need to provide documents for a pre-approved loan as the lender would already have their KYC (know your customer) and other details in their database.
Paperless loan application: The customers could apply for a loan through the bank’s website or mobile app by filling up and submitting an online form.
Quick processing time: If your papers are in order and all information tallies, your loan could get processed in no time. Pre-approved loans are, usually, approved, processed, and disbursed within the same day or within a very short time frame, if the verification process is successful. You could use the loan amount for your personal use.
Negotiation ability: In pre-approved loans, often the customers are in a position to negotiate the terms of the loan with the bank manager or the relationship manager. This happens because most often, for such loans, the bank approaches the customers with the loan offer.
Discounts: To lure you into pre-approved loans, lenders sometimes offer benefits such as processing fee waiver and lower interest rate. If you avail of these, your total debt might come down to some extent.
Beware Of Fake Pre-Approved Loan Offers
Pre-approved loan offers are generally available from the same lender from whom you have taken a loan previously. Authentic lenders will not give out pre-approved loans without reviewing the customer’s credit history.
“You need to cross check official documents (such as the offer letter) against the lender’s website to ensure authenticity. Also, look out for small details such as lender’s description, logos, website links, spelling mistakes, etc. You need to look out for any sign of forgery in documents. Authentic leaders will not charge any legal fee or ask for sensitive information such as OTP, card details, personal info, etc,” adds Kumar.
Remember that every call that you get with a loan offer may not be genuine.