How pre-approved loan work to fulfill your dream smartly

Be it planning your dream home or car or fulfilling any personal requirement a pre-approved loan can be helpful in meeting your goals as finance is one of the key factors which enhances our purchasing power when you are looking for a deal quickly to close.




People mostly make a mistake when they are in the process of finalizing deals as they engage in loan approval exercise. some time, they miss the opportunity to get a better deal.



Sometimes pre-approved longs give financial freedom when we are in the process of closing the deal because if you know your own financial position then you are in a better position to take a decision



Why you need Loan

Let us find out what is the right process to get a loan when required. When I focus on the need of the world it means we must have a specific reason for the loan, don't take unnecessary unless there is a need.



Some of the factors that need attention are retail inflation, fixed or variable interest rates, high processing fees, etc.

What is pre-approved loan

Pre-approval is an approval in principle based on the information provided at the time of application.


The eligibility criteria depend on the repayment capacity like credit score, salary income or earnings from business, past credit history and current relationship with the bank.

However, it isn't a guarantee that the loan will be funded, as once deals are closed with sellers like home or car or any other thing, you'll still need to complete a full application which requires final unconditional approval by your lender.

How to get pre-approved loan

Banks prepare a list of customers who have good credit score and past history with the Bank and such customer lists prepared at their zonal office or regional office of bank such selected customer details are shared with the respective branch of bank which has a customer account. 

Such respective branch office officer informs to the customer regarding the pre-approved loan offer on a regular basis and further preference given to those customers who are interested to take a loan.

A mortgage pre-approval usually lasts for sixty to ninety days. Once it expires, you may connect with your bank, this usually does not take an excessive amount of time to approve again as they already have all details.

In general bank charge process fee which can be 0.25% -1% depends on the various factors however it can be negotiable and can be less than that what they charge.

Pre-approved offers do not affect your credit score unless you follow through and apply for the credit. As the lender has identified you as a good prospect based on information as per credit history, however the pre-approval does not give a guarantee that you'll get the loan.

To get pre-approved you'll need proof of assets and income, good credit history, employment verification, and other types of documentation your bank may require.

Type of pre-approved loan

There are two types of pre-approved loan first one is known as Term loan and second known as demand loan. Term loans are such loans which offer more than 36 months like car loan, home loan, personal loan. 

Demand loans are less than 36 months and they are like short term loans. Such loans are mostly promoted by the bank from time to time and offer to customers with different lucrative schemes and benefits.

Advantage of pre-approved loan

Loan disbursement fast as it's already approved even you can get the loan amount disbursed within a day to your account this is because the bank already has your details.

If you looking to start business with zero investment then such pre-approved loan helpful to provide instant quick money to invest.

Pre-approved loan can help you get a flexible tenure on repayment option as the banks would trust you with your credit history, however you must carefully consider your loan tenure and repayment option.

As you received a pre-approved loan option it means you have a good credit history you can get competitive interest rates on such loans, with such a good credit record the bank would offer low-interest rates on pre-approved loans. 

Pre-approved loans offer less or paperless documentation as your KYC, income, identity proof and other details already with the lender.

the customer is in a better position to close the deal with the seller as they already have loan approval. as the approval received with all checks means having a pre-approved home loan also identifies you as a serious buyer in the eyes of the seller which can help you to negotiate for a better deal. 

Disadvantage of pre-approved loan

Sometimes people take out a loan because it was already approved due to the psychological impact of an available fiancé without understanding the necessity of the loan.

Processing fee impact if the validity of the approval letter expires hence the customer bound to close the deal with in the time limit.

Pre-approved loans have floating interest rates that may increase for pre-approved customers. Therefore, check the interest rates with your lender before accepting a loan offer although it is not mandatory that the loan interest rate will increase.

However, If the interest rates fall, during the pre-approval and disbursal process, the customer may not be able to benefit from the reduced rates.

it's not guaranteed that the principal amount approved will get the same amount disbursed to the customer. Pre-approved offer only indicates that you’re eligible for the loan. It doesn’t mean that you’ll get approved for the loan definitely.



Loan is a finance instrument which helps in fulfilling our dreams, however it is important to know the details before applying for the loan, one must know all the terms and conditions which helps in understanding all the pros and cons.



Clever utilization of credit facility is always appreciable though unnecessary participation creates financial burden.


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