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When unexpected emergencies occur, opting for a collateral-free personal loan is a smart move. While digital and streamlined application processes exist these days, documentation and credit checks can still be taxing due to approval uncertainties.
However, many times, lenders come up with an interesting offer called a ‘pre-approved’ personal loan. It is an instant personal loan offered by lenders that can help you secure funds for emergencies quickly.
This comprehensive guide will take you through the basics of a pre-approved personal loan and the steps you need to follow to increase your chances of securing a pre-approved loan.
An overview of pre-approved personal loans
A personal loan is collateral-free, requires minimal documentation, and offers you the flexibility to use the funds as you desire. Most lenders take about 24 to 72 hours for approval and disbursal.
However, existing customers are offered an instant personal loan facility by the financial provider, known as a pre-approved personal loan. This facility is offered based on your creditworthiness, which means you must have a good repayment history and credit score. It indicates that you have met the specific eligibility requirements, and if you wish to take a personal loan, your loan is likely to be approved swiftly.
Features of a pre-approved personal loan
Minimal or zero paperwork
That’s correct! If you have established a strong relationship with your current bank / lender, your financial information is readily available to the lender. This enables them to assess your creditworthiness and provide you with a pre-approved personal loan without requiring any paperwork.
Minimal processing time
A pre-approved personal loan takes minimal time to process the application. This quick processing is due to your pre-assessed credibility and meeting the eligibility requirements. Once your information gets verified, the loan gets sanctioned and disbursed within hours or at maximum, a day.
No security / collateral required
You do not have to pledge your assets as security for a pre-approved personal loan.
Flexible repayment tenure
You can choose a repayment tenure that matches your financial condition and aligns with your goals. A personal loan EMI calculator can help you understand the EMI amount payable every month. This gives you the chance to determine an EMI amount that fits your budget.
Attractive interest rates
Lenders may offer you competitive interest rates if you qualify for a pre-approved personal loan after assessing your creditworthiness and financial situation. It is offered to you only when you have a good credit score and a good repayment track record.
Prerequisites for a pre-approved personal loan
The eligibility criteria for a pre-approved personal loan differs across lenders. Yet, some general prerequisites are commonly considered by lenders. Listed below are some common prerequisites to be eligible for a pre-approved personal loan:
1. A good credit score
A pre-approved personal loan is offered if you have an excellent credit score (700 and above). A high credit score indicates that you are a responsible borrower.
2. Clean credit report
At times, having a good credit score is not enough. Your credit report must be clean and devoid of any negative remarks / comments by previous lenders.
3. Stable income and employment
You must have a stable job and income to be eligible for a pre-approved instant personal loan. Lenders go through your employment history and assess your income before they offer you this loan. Generally, lenders prefer that you have been employed by your current employer for a year or more.
4. Good repayment history
Timely payment of EMIs and credit card bills puts you in the lender’s good books. Your credit report gives the lender all the information they need on your repayment history and creditworthiness.
5. Existing customer
If you are an existing customer with the lender and have a good banking relationship with them, they are more likely to offer you a pre-approved personal loan.
6. Low debt-to-income ratio
It is important to evaluate your income, expenses and debt to ensure you do not go overboard with your debts. A debt-to-income ratio of 35% or less (this might vary across financial institutions) makes you a favourable candidate for any type of loan.
Tips to increase your chances of securing a pre-approved personal loan
You can consider the tips mentioned below to enhance your eligibility and increase the odds of getting a pre-approved personal loan:
1. Improve your credit score
Consider checking and improving your credit score. Review it regularly, rectify any errors, and work towards enhancing the credit score. This will have a positive impact on your credit score and enhance your chances of securing a pre-approved personal loan at the lowest personal loan interest rate.
2. Reduce credit inquiries
Multiple credit inquiries made within a short span can harm your credit score. Therefore, carefully choose a few lenders and apply for a pre-approved personal loan online rather than submitting several applications.
3. Reduce debts
If you reduce your overall debt, you can bring down your debt-to-income ratio to below 30%. This makes you an attractive customer for the bank, as lenders evaluate your repayment ability through the debt-to-income ratio.
Conclusion
Securing a pre-approved personal loan can ease your worries during financial emergencies. Eligibility hinges on a high credit score, stable income, and a strong lender relationship. For these loans, the lenders check your creditworthiness by evaluating your credit history and completing the initial approval process. Therefore, a pre-approved personal loan is processed faster, as you do not need to complete additional processing time when an emergency hits.
In case you don’t have a pre-approved offer and are looking for instant funds, IndusInd Bank has a 100% digital and paperless application process to secure a personal loan at affordable interest rates. Do not wait too long, apply now for a personal loan and fulfil your dreams!
Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.
