Personal loans are a great aid when you are in financial distress and need funds to tide over a crisis at hand. It is a short term loan that can be used any purpose so long as it is legitimate. Be it a medical emergency, a crisis on the business front or even a wedding in the family, where you need to scrounge up funds at the last minute, there is no better option than a personal loan.
You have easy access to funds in a matter of days after instant approval from most lenders, if you meet the eligibility criteria. If you have been a long standing customer of a bank or have displayed good credit behavior in the past, you may even qualify for pre-approved personal loans. Further, thanks to the extensive use of analytics, you are likely to get similar offers from other lenders. But the question to be asked is are they really worth it?
Let’s do a reality check. In this age of cut throat competition among lenders Pre-approved personal loans are doled out at attractive personal loan interest rate to grab the eyeballs of potential borrowers. These loans being unsecured in nature attract a high rate of interest and if the borrower has a good credit profile can be a valuable asset for the bank. Thus pre-approved credit is offered to customers whose credit profile is good.
From the borrowers perspective, pre-approval can be a great advantage, if you are really in need of funds. When you need funds urgently, you are likely to get a swift disbursal with minimum paperwork. Further, to sweeten the deal, the bank may offer additional benefits such as waiver of processing fees, EMI holidays and the likes that may decrease your cost. However, your credit record will play a vital role, despite pre-approval. Even though it is pre-approved, you will not get a personal loan without CIBIL check.
The lender reserves the right to disbursal and if your credit profile has undergone a change from the time of the pre-approval, the lender is unlikely to disburse the amount. The key to availing a pre-approved personal loan is need. Avail of such an option only if your requirement is genuine and your credit score is high. Using the pre-approved loan for discretionary spending, such as going on a vacation on loan or using it to purchase some white goods is a strict no-no.
Do’s and don’ts of availing a pre-approved offer
Before you even consider such an offer, ask yourself whether you need to take on debt on your financial books. If the need is indeed unavoidable, apply for the specific amount you need and not the entire amount you have a pre-approval for, just because the personal loan interest rate seems attractive. Secondly you must ensure that you have read in between the lines and understood the terms and conditions of the loan before you decide to go for it. Thirdly, consider other expenses such as processing fees that may be increasing your overall cost of borrowing.
Lastly, do not skip the step of comparing the loan on offer to similar products. With the abundance of web aggregators, it is easy to carry out such comparisons online. Only when you are convinced that the interest rate and other terms and conditions are the best as compared to other such loans, go ahead with your application of such a loan.
While your credit score is important in the case of most kind of credit, some non- traditional lenders may even be wiling to give you an offer a pre-approved personal loan without CIBIL check. Such lenders may just base the offer on your current income and future income growth possibilities.
To sum it up here are the pros and cons of a pre-approved personal loan
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