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What are Pre-Approved Loans? Research Team | Posted On Thursday, January 09,2020, 05:46 PM

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What are Pre-Approved Loans?



Pre-Approved Loans: Things You Need to Know:

A pre-approved loan can be defined as a pre-approved offer given by banks based on your credit report. Banks offer pre-approved loans in various format like pre-approved personal loan/ home loan/ and car loan. However, it is usually offered to individuals who carry out transactions with the bank and have a clean repayment history.

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Pre-approved loan offers are usually helpful when a customer is in grave need of credit. These loans take much lesser time to process than the non-approved ones. Thus there are lesser chances of rejection of the loan. Pre-approved loan offers also help customers to understand how much money he can avail instantly and thus he can take lending decisions accordingly.

Who is Eligible for Pre-Approved Personal Loans?

Banks and credit institutions are now opening up to the idea of pre-approved loan offers. These offers are given to the existing customers of the banks by considering various aspects of the customer’s bank accounts. Sometimes bank pre-approve a loan to the customer simply by evaluating certain conditions like cash inflows and transaction of the customer’s salary account or by considering the repayment trends of a credit card holder. Whatever may be the case, the pre-approved loan offers are rolled out for a limited period and the customer will have to accept the offer within that period.

See Also: How to Get a Better Interest Rate on a Personal Loan

Eligibility for pre-approved loans:

  • The borrower must be an existing customer of the bank
  • The customer must have a good repayment history
  • The customer must also have a good record of repaying debts and credit card bills
  • Individuals with no credit history are also eligible for pre-approved offers provided they have a constant source of income or have good savings in their bank accounts.

Some of The Key Features of Pre-Approved Loans:

Pre-approved loan have become instant hit among customers. If you are a regular customer of the bank, we are sure you are offered with many such pre-approved offers.  Have a look into some of the key features of pre-approved loans:

  • Quick disbursal of the loan
  • Attractive rate of interest
  • Minimal documentation
  • The Flexibility of usage of the fund
  • Repayment through easy EMI

See Also: Know All About Pre-Approved Personal Loans

Do You Need Pre-Approved Loans?

Before availing a pre-approved loan you must ask yourself if you really need the loan. Sometimes people apply for such loans without any strong reason to avail the credit. Since these loans are handy and can prove beneficial, you must use such offers only if you are in a pressing financial situation. Remember every loan comes with an extra cost known as the interest rate. At the end of the day, it is you who have to repay the loan and bear its burden.

Advantages of Pre-Approved Personal Loans:

  • Being eligible for pre-approved offers makes you eligible for getting instant funding whenever there is an urgent need of cash. The loans are approved and sanctioned within a day and the money can be used for any purpose.
  • If you become eligible for instant loan offers, you likely have a good credit score. Thus banks will offer you such loans at a lower interest rate since you have a clean repayment record.
  • You will not have to worry about extensive documentation when you are in need of cash. Pre-approved loans are sanctioned instantly for existing customers as the banks already have access to their KYC documents.
  • Some banks also offer benefits like processing fee waiver, lower interest rate and EMI holidays for eligible customers. If you avail of these loans during financial emergencies then these perks will help to reduce the overall cost of the loan.

See Also: When Should I Get a Personal Loan?

Disadvantages of Pre-Approved Personal Loans:

  • Pre-approved loans are rolled out only for a limited period. Since these are exclusive deals, you have to apply within the specified time to get the loan.
  • These offers only signify your eligibility for a loan and your application may be rejected if the bank does not approve your documents or credit score. So banks are not legally bound to sanction you a loan once it proposes for a pre-approved loan.
  • You must also check the interest rate of such loans before accepting an offer. While banks give good offers on pre-approved loans, sometimes they may also increase the interest rate in case they are not satisfied with your credit ratings.
  • Before finalizing the loan make sure to check the fee and charges associated with the loan. Some banks may charge a processing fee or transaction fee for pre-approved loans. You must also go through the foreclosure and partial payment terms to avoid confusion later.

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