Different types of loans are available to Indian consumers like Personal loans, Credit Cards, Automobile Loans, Home Loans, Loans against mortgage of property, Gold loans etc. Banks and Non-Banking Financial Companies usually provide these loans. Lenders often use the term Pre Approved Loan or Pre Approved Credit Card to market their products. The term “Pre Approved” is a misnomer and is often used as a marketing gimmick to attract borrowers. However, in some cases where individuals are existing customers of the bank, they may receive offers of pre-approved loans.
What is a Pre Approved Loan?
A lender may believe that based on publicly available or proprietary information a particular individual is eligible to get a loan of a certain amount. He will communicate this information to the individual that he is eligible for getting a loan of a certain amount. However, if the individual expresses interest to apply for the loan, he may have to furnish his Permanent Account Number and authorise the lender to do a credit check. Also, he may have to provide his Income details like Salary Slips or Income Tax Returns to prove his eligibility. Other documents which are required include Proof of Residential Address.
Sometimes, however, if an individual has an account with a bank and has been using the credit facilities of the bank, the bank may offer him an increased credit line without further verification because the individual is an existing customer of the bank and has a proven track record of regular repayments. This increased credit line can be offered in terms of an enhanced credit limit on the credit card or an amount credited to his bank account in a few hours of application. In such cases, no documentation is required and the loan is processed in minimum time.
Loan Pre Approval Process.
A bank or financial institution may offer a pre-approved loan to an existing customer when they are convinced about the repayment capacity and repayment history of the borrower. If the bank does not have adequate information about the borrower, it will ask for documents like a PAN Card, Address proof, Salary Slips of the last 3-6 months or IT Returns of the last 3 years, 6 months bank statements etc before it approves the loan.
A loan application may get rejected after pre-approval because the circumstances of the borrower have changed since the approval was received. Alternatively, the lender may have used the word “Pre Approval” only to attract the attention of the borrower. Therefore a loan may get rejected after Pre-approval.
Key Takeaways.
Pre Approved Loans are a myth. No Bank or Financial Institution will offer you a pre-approved loan unless you are an existing customer of the bank and they have adequate data about your credit history to indicate that you are capable of repaying their money and that you have the intention of paying their money. Banks may sometimes not ask for Income proof as long as you maintain a good CIBIL Score.
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