A pre-approved personal loan is a collateral-free and short-term loan offered by financial institutions such as NBFCs and banks to their clients. You can get such loans quickly if you have a decent credit score and a good repayment history.
A pre-approved loan is a type of personal loan offer made to existing and eligible borrowers based on the information they provided in their application and their credit history. If you already have a relationship with a lender, you can check if you are eligible for a pre-approved loan tailored to your specific needs.
Listed below are ten essential facts to keep in mind regarding a pre-approved personal loan.
Make sure the loan amount fits your needs:
You need to list all the things you require and then prioritize which of those needs you want to finance with a loan. There are many everyday purposes for taking out a personal loan offer, such as funding a wedding, purchasing a car, addressing a medical emergency, or planning a vacation. If you can calculate the costs and expenses associated with your needs, you can decide how much money you need to borrow.
Analyze your repayment ability:
Preparation is essential before borrowing a loan. By routing your investment income towards EMI payments, you can accomplish this. However, you must also ensure that your income is sufficient to repay the loan. You can use the online EMI calculator to predict your monthly instalment and plan your repayment accordingly.
Don’t fall for gimmicky offers and plans:
The market is filled with financial institutions offering artificially low-interest pre-approved loans or gimmicky schemes to attract customers. Unfortunately, in many cases, once you read the fine print, you will find that these loans are more expensive than you had initially anticipated. Hence, it’s essential to be vigilant and read all the terms and conditions and the associated charges.
Assess all costs:
Whenever you take out a pre-approved personal loan, you can expect to be hit with various costs, including processing fees, prepayments, late payments, etc. Consider your lender’s fees before applying for a loan to know how much it will cost. It can help you manage your finances better, and it can help you decide if the loan is one that you can afford.
Compare interest rates:
When you compare the interest rates offered by different financial institutions, you can ensure you get the lowest rate possible. In addition, you can compare the rates offered by other financial institutions on various online platforms to make the best decision. In this manner, you can choose the type of interest most suitable for you, making EMI repayments for your loan much more manageable.
Assess your current liabilities:
Before accepting the pre-approved offer, you must consider your current financial obligations. Therefore, determine your debt-to-income ratio to make an informed decision and understand whether you can afford the personal loan you wish to take out.
Check foreclosure rules:
It is common for loans to have the option of foreclosing before their entire repayment tenure ends. If you ever choose that route, you should know the foreclosure charges associated with your pre-approved personal loan. In addition, you should know the minimum lock-in period and the percentage fee related to closing the loan before it has been repaid in full.
Choose the right lender:
Almost all public, private and non-banking financial companies offer pre-approved loans with competitive interest rates and attractive terms and conditions. At this point, you will be bombarded with phone calls and text messages from financial institutions providing information about their loan offer products. As a result, it is crucial to conduct quality research and compare pre-approved loan offers before choosing a specific lender.
It is important to consider the repayment period before taking out a pre-approved personal loan. The repayment term refers to the length of time over which you will pay your EMI. If you pay off your loan over an extended period, your EMI will be smaller. In addition to the extended repayment term, a longer repayment period is also associated with a higher interest rate, which is why the repayment period is recommended to be kept as short as possible.
It is essential to consider your EMI or equated monthly instalment to decide on the best pre-approved personal loan for your needs. A monthly payment to the lender made by you consists of both a portion of the principal amount and the amount of interest. It is understood that when you take out a loan after accepting a personal loan offer, you must be able to repay it fully.
However, it is important to note that even a single missed EMI payment can severely affect your credit score and cost you a late payment charge. Therefore, before applying for a loan, you should use an EMI calculator to calculate the approximate amount you will have to pay as EMI if you intend to take out the loan.