Some banks and NBFCs give pre-approved loans to customers right away. They only need a few pieces of paper and don’t need any collateral or security. A borrower can negotiate the interest rate on a pre-approved loan. You can take a loan for any reason, and it’s a great way to cover immediate costs like those caused by a sudden job loss, a medical emergency, or something else out of your control.

Why did they offer me a pre-approved loan?

Your financial institution verifies and authenticates your financial history. If a potential borrower has good enough credit to qualify for a loan, lenders will often let them take out an instant personal loan without documents. Getting this offer means someone has a reasonable opinion of your creditworthiness. For example, if you have a salary account at the bank, they will know how much money you make and how much you spend every day. There are other ways, such as:

Credit score: If you have a good credit score, your lender may have given you a pre-approved personal loan.

Transaction history: Your lender may have looked at your past transactions and seen that you have a good bank balance and a high rate of transactions. Customers with no credit history or record of paying back loans can also get an instant loan without documents online, as long as they have a steady source of income and a large amount of savings in the bank.

Previous loans: If you have taken out loans in the past and paid them back on time, you may be eligible for pre-approved loan offers. You can also help by paying your credit card bills on time.

Remember that pre-approval doesn’t mean that an offer will be made. It’s just a sign of whether or not you can get a loan. Even if you’ve been “pre-approved” for a loan, the lender can still turn it down if you don’t meet all of the requirements during the verification process.

What are the advantages of loans that are already approved?

There are many advantages of pre-approved personal loans, such as:

Instant funding: Getting pre-approved loans is like having a safety net when you need money fast. When the verification process goes well, these loans are usually approved and paid out within a few minutes. They can be used for any personal purpose. Since you already met the requirements for the loan, the verification process can be done in less than a day, and you won’t have to go through a lot of scrutiny. This is one of the best advantages of pre-approved personal loans.

Competitive interest rates: If you have a good credit score, the interest rate on a pre-approved personal loan will usually be lower than if you applied for the loan on your own.

Minimum paperwork: Existing customers eligible for pre-approved loans don’t have to worry about paperwork because the lender already has your KYC, bank, and other information about your income in their database. New customers can also get loans from some financial institutions. In these situations, you’ll need documents like bank statements (usually from the last six months), pay stubs from the previous three months, a PAN card, and proof of residence.

Online process: Most lenders offer their loan services online. You can avail of a pre-approved personal loan through their mobile app or website. Soft copies of the required documents can be uploaded on the lender’s app or website in the correct format.

More bargaining power: With pre-approved loans, the lender comes to you with their product instead of you going to them with a request. This gives you more ability to negotiate with your lender about the loan terms whenever it’s convenient for you, so you can lower the interest rate or extend the tenor to pay back the loan.

Better financial planning: When you apply for a loan, you might not know if you’re eligible for it, so your application might be turned down. With pre-approved loans, you can better plan your finances because you know exactly how much money you can get.

Special discounts: To make the terms of the pre-approved loan more appealing, your lender may also add perks like no processing fee, lower interest rates than those for regular customers, EMI holidays, etc. These perks can help lower your estimated total debt by a small amount. However, this varies from lender to lender.

Conclusion

Even though there are many advantages of pre-approved personal loans, getting one is no point if you don’t need it. Don’t get into debt unless you need the money. If you have to take out the loan, make sure you only borrow what you need and not what the lender is willing to give.