Are your pre-approved loans really pre-approved?

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Loans that are been pre-approved can be secured, such as home loans or auto loans, or unsecured, such as personal loans or credit card loans. Before making you an offer, banks evaluate your financial situation and ability to repay the loan based on any past loans you may have taken or on how you handle your credit cards.

If your financial situation is sound, you will be offered a pre-approved loan. In short, a pre-approved loan is a loan offered depending on your creditworthiness.

Are they really pre-approved? Not really

Pre-approved loans are classified into personal, small business, and home loans. Banks make such loans to prospective borrowers when specific pre-determined terms and conditions are met beforehand.

The eligibility criteria depend entirely on the lender’s risk tolerance and the amount of information available about the borrower through his bank account details.

That said, pre-approval does not imply that the bank is now obligated to provide the applicant with a loan. It is basically just a bank offer.

It does not ensure that you will receive the loan regardless of what happens. You must still follow all of the required processes for obtaining a loan as you would have in any other loan.

How is a pre-approved loan processed?

The bank will conduct minimal creditworthiness, identification, and verification checks as with any other loan.

Pre-approved loan offers typically include competitive interest rates. This means that you pay less interest than you would on a similar loan. This reduces your monthly EMIs, allowing you to meet your financial obligations more inexpensively.

A person with a low CIBIL score cannot be approved for a pre-approval loan, as they may be in default on other loans from various banks. Pre-approval loans are always subject to terms and conditions and are not guaranteed.