Find out the pros & cons of a pre-approved loan, and get knowledge on how to best use them.
A pre-approved loan is as the term implies, it is approved beforehand – even before you consciously apply for it. The bank where your salary is credited is usually where your pre-approved loan is granted. Why? Well, simply because your entire transactional history is already available with them. It means that based on your previous spending patterns, the bank will pre-decide how much loan amount would ideally suit you.
Just because you are granted a loan doesn’t mean you should take it, right? Nobody would take it unless there is a driving need, and it doesn’t have to arise just because you have a letter of approval at hand. However, if you are someone who is on the look out for a new home, and looking for a loan then this one is for you.
Here’s the upside:
- If you have already zeroed in on your property or have an emergency need that needs to be met soon, then this type of pre-approved loan is for you because your processing time is definitely going to be reduced as compared to the time it will take you to apply for loan at a different bank.
- The documentation is also going to be minimum, as the bank already has most of your financial history & personal information.
- Since the bank is taking the initiative to offer you a loan, the rate of interest loan is usually at a discounted rate and is generally a good deal to go ahead with provided you are sure you need a loan in the first place.
Here’s the downside:
- Sometimes, there are situations where these so-called limited offers are thrust upon anyone who earns well and seems to have a good credit score.
- In case you aren’t in need of a loan, there’s no point in taking it up.
- Or there may be a situation wherein you have a loan granted but haven’t really finalized on a property to purchase – which again means that there is no use for a pre-approved loan.
Remember, that having a pre-approved loan at your disposal does not necessarily mean your loan is sanctioned, there will be the usual process of verifications only after which your loan will finally be granted. Keep in mind that the final approval for any type of loan is at the discretion of the bank irrespective of whether it is pre-approved.