An instant personal loan online is a saviour when funds are required urgently. It’s a short term credit readily available at NBFCs, in most cases without collateral. Think of an urgent surgery, marriage or foreign education, a personal loan meets any fund requirement, heads-on.
As the personal lending market grows, we see trends favouring pre-approved personal loans. Lenders are promoting them everywhere. You might have received a text message, email or a call from a lender informing you of your eligibility for a pre-approved personal loan. A similar message might appear on an ATM kiosk post-withdrawal or bank’s app just upon logging in.
What is the hype all about? Why is it significant, if at all? Let’s discuss it all, in detail.
What is a pre-approved personal loan?
The lender evaluates your credit history “unofficially” via soft credit pull, and offers you a loan. The process is called pre-approval, and the funds thus provided are categorised as pre-approved loan. It’s an “Invitation to Apply” offer from the lender to usually its “good” customers. Home loan, personal loan, vehicle loan or business loan, anything can be pre-approved.
Note that a pre-approval personal loan is just an offer, not a binding. That means the lender can consider you are giving a personal loan but isn’t bound to do so. You receive funds only upon going through the application process and furnishing the required documents. However, the pre-approved loans are quicker and more convenient vis-à-vis the traditional loans. Since your eligibility is determined beforehand, the approvals are speedy with no collaterals involved.
What does the lender consider for pre-approvals?
Lenders have much at stake when lending money minus collateral. They are, thus, cautious about whom to give instant personal loan online via pre-approvals. Here’s what they consider.
- Pre-approved loans are all about creditworthiness. You are eligible for the pre-approved personal loan if you are a responsible borrower with a tidy credit history: the lender checks and analyses your record in due clearance and existing loan repayment. To be eligible, repay your credit card debts and loans, on time, month on month.
- The lender typically looks into your monthly income, bank balance and/or transaction rate to ascertain your eligibility for the offer. The idea is to get a fair idea of your earnings vs expenditure and savings. The higher income backed by a strong savings record ensures better chances of you being considered for a pre-approval.
How are pre-approvals beneficial?
Pre-approved personal loans come with a host of benefits for you, the borrower, including:
● Speedy processing:
The lender has done all the hard work of determining your credit record beforehand. Note that, creditworthiness check is always tedious, involving considerable time and effort. Now that’s out of the way; your application can be processed quickly, usually within minutes. Once approved, your funds are directly disbursed into your account in a matter of hours, not days. Pre-approvals are, thus, handy when you require instant personal loan online at the twelfth hour.
● Easy Loaning:
Loaning has its share of challenges, notably the collateral. Lenders usually ask you to pledge an asset against the loan to guarantee repayments. However, such onerous restrictions are not generally applicable in a preapproved personal loan. Plus, the documentation is as easy as it gets. Specifications may vary from lender to lender, but you’ll be required to furnish previous three months’ salary slips and bank statements, along with ID and residence proofs, and PAN card. Given the rising competition, lenders offer doorstep service. Their representative will visit you at the time and place of your choosing to collect documents and proceed with the paperwork.
● Informed decisions:
The pre-approval works on the customer side as well. You check your qualification for a personal loan with a particular lender, along with applicable interest rates, processing fees, tenor, terms and more. It can be ascertained via the lender’s personal loan calculator. For starters, its specialised software designed to compute interest rates, EMIs and tenors, among others. It all boils down to informed decisions based on firsthand knowledge, not hearsay.
● Competitive interest rate:
Pre-approvals not only make borrowing more natural, quicker and more convenient but cost-effective as well. When your credit history indicates your creditworthiness, the lender is pretty assured of debt recovery. The assurance factors into competitive interest rates. You can even expect lower than standard interest rates if the NBFC is hard-pressed to sell loans to meet its targets.
Pre-approvals don’t disappoint you on the flexibility front as well. Apply online or via the lender’s physical branch; the choice is yours. Since an “Invitation to Apply” offer, the possibility of negotiating terms to your advantage is always there. Feel free to negotiate the tenor and schedule to suit your repayment capacity. Flexibility also comes with no end-use restrictions.