benefits of Pre-Approved Personal Loan

What are benefits of Pre-Approved Personal Loan?

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March 23, 2022 • 2072 views
Author: PoonawallaFincorp Category: Personal Loan

Pre-approved loans are instant loans disbursed by banks and NBFCs to select customers. They require minimum documentation and no collateral or security. The loan interest rate varies based on the borrower's profile. The loan can be availed for any reason and is very useful for meeting immediate expenses due to sudden job loss, medical emergencies, or any other unforeseen event.

Why was I chosen for a pre-approved loan?

Your bank authenticates and verifies your financial track records. If a potential borrower's creditworthiness is found to be eligible for a loan, lenders will often offer them the facility of availing of a pre-approved loan. Simply put, if you get this offer, it means that your creditworthiness has been assessed favorably. For example, the bank will have an idea about your income and your daily cash flow if you have a salary account with them. Other methods of assessment can include:

  • Credit score: Your bank might have deemed you eligible for a pre-approved personal loan based on your good credit score.
  • Transaction history: Your bank might have reviewed your transaction history with them and noticed a good bank balance and transaction rates. Customers with no credit history and repayment records are also eligible for pre-approved loans as long as they have substantial savings in their bank account and a steady source of income.
  • Previous loans: You might be chosen for pre-approved loan offers if you have taken loans from your bank in the past and paid them back on time. Being diligent with the repayment of your credit card bills also helps.

However, keep in mind that the pre-approval doesn't guarantee an offer. It is merely an indicator based on your eligibility to get a loan. Although "pre-approved," your loan request can be rejected by the lender if you do not meet all eligibility requirements during the verification process.

What are the benefits of pre-approved loans?

Pre-approved loans come with several benefits such as:

  • Instant funding: Being eligible for pre-approved loans acts as a safety net for your urgent financial needs. Such loans are usually approved and disbursed within a few minutes once the verification process is successful and can be used for any personal purpose. The verification process can be completed in less than a day since you have already passed the eligibility criteria for the loan and need not be subject to severe scrutiny.
  • Flexible loan period: You have more of a say in choosing a loan repayment tenure that is suitable for you. This usually ranges between 12 and 60 months. Keep your repayment capability in mind when selecting the loan tenure so that you don't default on the repayment.
  • Competitive interest rates: On account of your good credit score, the interest rate charged on a pre-approved personal loan is generally lower than what would be charged if you apply for the loan otherwise.
  • Minimum documentation: Existing customers eligible for pre-approved loans need not worry about documentation as the bank will already have your KYC, bank, and other income details in their database. Certain financial institutions also offer loans to new customers. In such cases, documents like bank statements (usually six months), last three months' salary slips, PAN Card, and proof of residence (Driving License, Aadhaar Card, Passport, etc.) are required.
  • Online process: Most lenders offer their loan facilities online, wherein you can apply for a pre-approved personal loan through their mobile app or website by filling up and submitting a form online. Soft copies of the required documents can be uploaded in the necessary format to the mobile app or website of the lender.
  • More negotiating power: In the case of pre-approved loans, the bank approaches you with their product instead of you walking in with a request. This gives you better leverage to negotiate the loan terms with your bank manager at your convenience to bring down the interest rate or increase the tenure or repayment term. However, this advantage gets nullified if you apply for the loan online as there is no human intervention.
  • Better financial planning: When you apply for a loan, you may not know your loan eligibility and may end up with a rejected application. Pre-approved loans help you plan your finances better as you know exactly how much funding you are eligible to receive.
  • Special discounts: To make the terms of the pre-approved loan more attractive, your bank may also add benefits such as processing fee waiver, lower interest rates than that for regular customers, EMI holidays, etc. These perks can help reduce your overall estimated debt slightly.

How do I apply for a pre-approved loan?

Applying for a pre-approved loan is a simple, straightforward procedure. Here are the steps you will have to take:

1. Check with your bank if you are eligible for a pre-approved loan offer. You can get this information by calling your branch or logging in to your net banking account.

2. Submit a duly-filled application form which can be obtained from the lender's mobile app, website, or branch office.

3. Choose the loan amount you require and a convenient repayment period.

4. The loan amount should be credited to your bank account once the lender has successfully verified your details.

Are there any disadvantages of pre-approved loans?

The loan offer is extended to you based on the assessment of your creditworthiness even if you do not yet require a loan. And since these offers are usually valid for only a limited period, the timing may not necessarily coincide with your requirement for a loan.

Before signing any loan deal with your bank, take a thorough look at all the fees and charges. Some banks may charge an additional processing fee on pre-approved loans or put in extra costs such as transaction fees or high penalties on foreclosures and partial pre-payments.


Although the perceived benefits of pre-approved personal loans are vast, there is no point in taking a loan if you do not require it. Go into debt only if you are really in need of money. Also, a pre-approved loan might not be the best option for your specific situation. For example, you may choose to opt for a credit line instead, where you can get final approval and still won't have to pay any interest until you actually use the money from your approved limit. If you must take up the loan, ensure that you take only the amount you need and not the amount that the bank is willing to give.

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