How Pre-Approved Loans Differ from Regular Personal Loans?

Personal loans, or say the regular personal loans, are a very common way to gather funds for some important tasks like education, marriage or home renovation. A personal loan needs you to apply for one, and then repay the same with interest through Equated Monthly Instalments (EMIs).

Pre-approved loans are, as the name suggests, loans offered to select customers by a bank or some financial institution like NBFCs (Non-Banking Financial Corporations). These loans come pre-approved, meaning, they require less formalities and time for getting approved and also consider your preferences like when it comes to the interest rates.

When you need money quickly, choosing the right loan matters. Regular personal loans are open to everyone but take 2–7 days to process and require full paperwork. Pre-approved personal loans, on the other hand, are offered to select customers with good credit scores usually above 730 and can be disbursed within 24 hours. Pre-approved loans generally come with lower interest rates, ranging from 10.49% to 14% per year, while regular loans vary based on your credit profile.

While both serve the same purpose, they are different in many ways.

What is a Personal Loan?

A personal loan is one you apply for. It needs various documents that are to be verified and some considerable amount of time as well. It is approved based on various factors which include your credit history, income amount and stability, your ability to repay the borrowed sum with interest, etc. There are further eligibility checks done. After the procedure, the loan amount you requested is disbursed to you, probably in your account.

Personal loans have become one of the most-preferred short-term finance options in the country.

What is a Pre-Approved Personal Loan?

A pre-approved personal loan, on the other hand, is one that is extended by lenders to some customers only. The customers are selected based on their financial behavior, creditworthiness, credit history, as well as their relationship with the lender. These loans offer some advantages over the regular personal loans, as they save time and are more instant. They will also require less of formalities like documentation and credit check.

Hence, the disbursal is quick and the option is more suitable when you instantly need funds. Moreover, you might get more benefits due to competitive interest rates charged with pre-approved loans.

You may also like "How Many Personal Loans Can I Have at a Time?"

Regular Vs Pre-Approved Personal Loans: Know the Differences

Here is a table to clarify the differences in brief in the beginning:

When it comes to pre-approved loans, selections are only from the active clients. These are individuals who have had a good credit history, credit score, credit repayment behavior and good and stable income too.

Basically, the lender is already aware that the client will be able to easily repay the loan amount with interest. That is the reason, documentation requirement is low, credit check is not necessary anymore and the time taken is less with customizable interest rates.

Other benefits of pre-approved loans over the regular ones include:

• Better, more offers
• An opportunity to get a customized personal loan that is pre-approved
• Access to funds quickly during an emergency
• Chance to further improve your creditworthiness
• Lesser background checks needed
• (Full) KYC might not be needed

Don't miss this! "How to Apply for a Personal Loan Without PAN Card?"

Choosing Between the Two

When you are already getting a pre-approved loan, then you might be in the dilemma of deciding on saying a yes to it.

Consider these factors to accept a pre-approved loan:

• Say a yes in the following cases:
  • When you also need the money urgently
  • When the loan interest being levied is low and competitive
  • When you are sure that you will be able to repay the amount as per the agreement
• You may avoid accepting the same in the below-mentioned cases:
  • When you are not in an urgent need of funds
  • When you are not unsure if you will be able to repay the amount borrowed
  • When you need a customized loan amount, or a longer tenure for the repayment

You may instead choose a personal loan if you need flexibility with the tenure and loan amount, and when you have compared various lenders and loans to have found a better option in regular personal loans.

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