Personal loans have seen enormous growth of about 20.4 percent annually in January 2023. This is due to the quick and hassle-free processing and the availability of pre-approved personal loans.
Key Highlights of A Pre Approved Personal Loan
|Quick Loan Disbursal|
|No collateral or security required|
|Flexible loan amounts|
|Repayment in EMIs in flexible tenures of 12 to 60 months|
What Are Pre-Approved Personal Loans?
A lender extends a pre-approved personal loan after reviewing your credit score and other related financial information. Unlike traditional personal loans, pre-approved loans do not have a formal application process.
You can meet unexpected short-term expenses with instant pre-approved loans. After evaluating your creditworthiness, the lender may extend you a pre-approved offer. If you are found eligible, you will get a pre-approved offer specifying the loan terms and conditions.
Benefits of Pre-approved Personal Loans
- Instant funds or quick funding
- Flexible loan tenures
- Competitive interest rates
- Minimum to Nil documentation
- Quicker processing time
- Paperless loan application process
- You can negotiate the terms of the loan with the bank manager and reduce the interest rate or repayment tenure
- Special waivers such as processing fee waivers, lower interest rates than for regular customers, EMI waivers for 1 to 3 months, etc.
Eligibility For A Pre-approved Personal Loan
- Customers should have a good credit history
- Must currently be customers of the bank. Certain banks lend to new customers also.
- Record of repaying debts should be clean
- Individuals with a Nil credit history and repayment record are also eligible as long as they have substantial savings in their account and a stable source of income.
Popular Banks Providing Pre-approved Personal Loans
|Bank name||Loan Amount||Rate of Interest||Processing fee||Repayment Tenure|
|ICICI Bank||Upto Rs. 10 lakhs||11.25% onwards||1.25% of loan amount + GST||Upto 60 months|
|Aditya Birla Capital||Upto Rs. 15 lakhs||14% onwards||At the discretion of the bank||Upto 36 months|
|HDFC Bank||At the discretion of the ban||10.50% onwards||At the discretion of the bank||Upto 60 months|
|IDFC First Bank||Upto Rs. 40 lakhs||10.49% onwards||Upto 3.5% of the loan amount||Upto 60 months|
|State Bank of India||At the discretion of the bank||At the discretion of the bank||Nil||At the discretion of the bank|
How To Improve Your Probability of Getting A Pre-Approved Personal Loan?
Your credit score is an important factor in determining your eligibility for a personal loan. The higher your credit score, the higher your eligibility for a personal loan.
Here Are Some Guidelines To Improve Your Score
- Make timely payments: Making late payments will lower your credit score, so it is essential to pay your EMIs and bills on time.
- Monitor your credit score regularly: Track your credit report regularly to identify any discrepancies and rectify them to maintain a good score.
- Keep The Credit Utilization Ratio Within 30% of Your Total Credit Limit: Keep the CUR within 30% of your total credit limit to maintain a good credit score.
- Keep Old Credit Accounts Open: Avoid closing old unused loan accounts, since having a longer credit history will improve your credit score.
Some common reasons for not getting pre approved personal loans are as follows:
- Poor Credit Score: When you have a poor credit score, it reflects poorly on your financial discipline. It means you have defaulted frequently on your EMI and bill payments. Lenders will view you as a risky borrower. So, they may not give you a pre approved personal loan offer.
- Inadequate Income: When your level of income is inadequate, lenders may get the doubt as to whether you will be able to make your repayments on time. So, they may not give you a pre approved personal loan offer.
- Unstable Employment History: If you have frequent breaks and have been in between jobs, again your repaying ability may be doubted by banks. In this case, a pre approved personal loan offer may be denied.
- Incomplete Documentation: Most banks have a set criteria for the documents required along with the eligibility criteria. So, not having your documents in place may not give you an approval of a pre approved personal loan.
How To Choose The Correct Pre-Approved Personal Loan?
There are multiple factors that you must consider before taking a pre approved personal loan
- Interest rates: The interest rate is a crucial factor that influences the total cost of the pre approved personal loan. Look for a loan offer with an affordable interest rate that fits your budget.
- Fees: Check for the fees pertaining to the pre-approved personal loan, such as prepayment penalties, late payment fees, or processing charges. These charges add up to the borrowing cost of the loan. So, carefully consider these charges before you choose the pre approved personal loan offer.
- Repayment Terms: The loan’s repayment terms must be flexible and tailored to your needs. Consider the loan duration and monthly payment amount before choosing a pre-approved loan offer.
- Compare different loan offers: It is crucial to compare different loan offers to choose the best pre-approved personal loan. This is because lenders may have different loan amounts, interest rates, and repayment tenures.
- Evaluate your financial situation and borrowing needs: Before you choose a pre-approved personal loan offer, you should evaluate your financial situation and borrowing needs. This way, you can choose one that fits your budget and has flexible repayment terms.
- Assess the lender’s reputation and customer service before making a final decision.
How To Apply For A Pre-Approved Personal Loan?
- Verify with your bank to check if a pre-approved loan offer is available for you.
- You can log into your net banking account to check if you are eligible for a preapproved loan.
- Submit a completely filled loan application form, which can be obtained from the lender’s website, SMS, branch office, or mobile app.
- Decide and choose the loan amount and the repayment tenure
- After you accept the loan offer and successful verification by the bank, the loan amount will be credited to the bank account.
- You may be required to submit documents like the previous 3 month’s salary slips, employee ID card, and KYC details like PAN and Aadhaar card.
Pre-approved personal loans are easy to apply for and convenient to access. By improving your income and credit score, and comparing the different pre approved personal loan offers available, you can choose the offer most suited to you.