Everything You Need to Know About Pre Approved Personal Loan Offers
There is a wide range of options available when it comes to getting funds for an emergency. A popular choice is personal loans.
However, your personal loan application may be delayed for a variety of reasons. Some of these include insufficient documentation, a low credit score, or income below a minimum specified limit. In such cases, you can apply for a pre-approved personal loan.
What are pre approved loan, and can anybody apply for them? To know the answers to these questions and more, read this complete guide on pre-approved personal loans.
Understanding Pre Approved Personal Loan
Pre-approved personal loans are offered to specific customers who meet the following criteria:
- A decent credit score
- Good loan repayment history
- Minimum Income
- Low debt-to-income ratio
If you meet these criteria, you qualify for pre-approved loans without collateral (unsecured loans) and minimum paperwork. Such loans are offered by both banks and NBFCs (Non-banking financial companies).
How Can You Use a Pre-Approved Loan?
There are different purposes for which pre approved personal loan can be used. They include:
- Travel to any destination locally, nationally, or internationally
- Wedding expenses
- Buying an expensive gadget like a tablet or a smartphone
- Renovating your home
- Consolidation of existing loans
Characteristics of Pre-Approved Personal Loans
Here are some features of pre-approved personal loans:
Interest Rate:
Since the lender checks your creditworthiness before accepting your application, the interest rates of such loans are usually lower than regular personal loans.
Tenure of Loan:
Pre-approved loans are usually offered for a period of 1 to 5 years.
Speed of Processing Loan:
You can get such loans in a matter of minutes or a few days, depending on your documentation and credit score.
No Collateral Required:
Since this is an unsecured loan, you don’t need any collateral.
Repayment Period
You can choose a repayment period to suit your cash flows.
Little or No Documentation
You don’t need to worry about pages of documentation with such pre-approved loans.
Online Application
You don’t need to visit the bank or stand in a queue to apply for such loans. It takes just a few minutes to apply for pre-approved loans online if you have all the required documents.
How to Improve Your Chances of Getting Pre-Approved Personal Loans?
Here are some ways to ensure that your application is approved:
Maintain a High Credit Score
When you maintain a credit score of 750 or more, banks and NBFCs are more likely to accept your application. They know that the loan will be repaid on time.
EMI Limit
To reduce the chances of EMI (Equated Monthly Installment) default, limit your EMI to 40% of your take-home salary. The lower the debt-to-income ratio, the higher the chances of getting the loan.
Check Credit Card Spending
Use your credit card responsibly for essential monthly expenses. When you repay your credit card bills within the billing cycle, your credit score and history both improve.
Avoid Multiple Loans
Having a good credit score does not mean you go for multiple loans. Analyze your needs before you apply for a loan. Find out how much you can afford using a personal loan interest rate calculator. Enter the required information, like loan amount, tenure, and interest rate, to get the monthly EMI.
Have a Mixed Loan Portfolio
Use a mix of both secured and unsecured loans in your portfolio to improve your credit score.
Try Debt Consolidation
If you have high-interest loans, try to repay them first, and keep your total interest obligation on loans low.
Don’t Add to Your Current Loan
If you have already opted for any pre-approved personal loans in the last six months, try avoiding further loans. Banks could doubt your loan repayment capacity in such cases.
Points to Consider Before Applying for Pre Approved Personal Loan
Keep these factors in mind when applying for pre-approved loans:
Time Bound Offers
Pre-approved loans are generally limited-period offers. You need to apply for them well before the expiry date to be considered eligible.
Know the Fee Structure
Before you apply for a pre approved personal loan, know all fees associated with such loans. These include foreclosure, prepayment, and processing fees.
Compare Offers
With online portals offering free information on personal loans, find out the lenders with the best offers. Compare their rates and then finalize the loan.
What Documents Do You Need for Pre Approved Personal Loan
Here are some important documents you need for such loans:
Identity Proof
Aadhar cards, PAN cards, or passports are accepted.
Address Proof
Eligible documents include a Driving License, Aadhar card, and passport.
Income Proof
Last 6 months’ bank statement and your latest salary slip would be required.
Conclusion
Pre approved personal loan are a lifesaver when it comes to financial emergencies. However, like any other loan, they have certain eligibility criteria which you need to check. If you have a low credit score, there are ways to improve it. With disciplined spending, you can get a higher credit score and be eligible for pre-approved loans.
