Pre-approved loans are loans of a specified sum will provide to the clients by their different types of financial entities to fulfil their need for the money for certain criteria. Pre approved loans have two types, these are following-
- Unsecured pre approved loans: these types of loans include personal loan and credit card loans etc.
The bank usually studies their client’s track records before approving these types of loans. It depends upon the account type clients have with the bank. If client has a salary account than the bank knows his/ her cash flow or if the client had taken a loan before the bank knows about the servicing of loan. A pre-approved loan doesn’t mean that a client will defiantly have that it is only principle approval. The bank has no obligation for it, the loan will only disburse if client have financial difficulties. Normally, validation of pre-approved loans is for 6 months.
Benefits of pre approved loans
Increase in Negotiation power: the benefit of pre approved loan is to negotiate with the bank because; the client can have loans from other bank by his/ her cash flow statements. The client can influence the loan offer to get improved rates from other banks. And client can also talk to his/her lender about the pre approved loan and it can be negotiated with them.
Credit card loan and Personal Loan: these loans are best for someone needs cash immediately. This helps the client to stop borrowing money immediately at abnormally rates of interest.
Car and Auto loan: car and auto loan suits the budget of the client because they have been pre approved on the basis of their account activity and previous loan service. So the client most likely to get a great deal from its bank, for the fast transaction.
Less processing time: In this type of loans the background of the clients is checked before, with the help of basic and cash flow statement with the lender bank. So the loan processing time is lessen and they provide fast loan services to the client. This means the sanctioning of loan has less time than normal.
Lower interest rates: a pre-approved loan generally offered to the client with lower interest rates. the reasons behind this is the bank is offering a loan and they want it attractive and influence to the client so they generally keeps interest rates low for the pre approved loans. And the other reason behind this is a good history of client’s cash flow statement that makes the not risky customer of the bank.
Disadvantages of the pre approved loans:
Fixed time-frame: generally Pre-approved loans are valid for 6 months time. So the client has to shortlists its need for example car, home, personal or credit loan. Bank will only provide money after the short listing of the client needs to shortlist first than the bank will give him/ her money.
Additional processing fees: clients need to pay the processing fee for two times if the time period of pre approved loan is end. He/she has to pay processing fee to renew the loan.
Is it good to consider such offers?
These types of loans are not different from the regular loans. But they are provided with low interest rate, according to the requirement of loan and the processing time is less, so one could consider this type ]of loans from the bank or from the other bank.