What are the 4 Major Disadvantages of Pre-Approved Home Loan?
By Anupama Deshpande | July 11, 2019

A pre-approved home loan is an in-principal approval offered by the banks or HFCs to extend home loan to the applicant on the basis of his eligibility and credit worthiness.

It is true that a pre-approved home loan allows you know your loan eligibility and make the financial decision accordingly but as every product has its advantages and disadvantages, a Pre-Approved Home Loan also has some disadvantages.

For your better understanding, we are detailing below as to what are the 4 major disadvantages of pre-approved home loan?

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As in case of a Pre-Approved Home Loan, the interest rate is locked for a stipulated period (say 3 months to 6 months), so during the pre-approval and disbursal process, if the interest rate on home loan falls then you are able to get the benefit of the reduced rates.

For applying for a Pre-Approved Home Loan, you need to pay a processing fee to process your loan application. This processing fee is a kind of administrative fee which is charged for processing your application. Hence it is not refunded even if you do not opt for a home loan from that lender from where you have got Pre-Approved Home Loan.

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Suppose you have got a Pre-Approved Home Loan but have not bought any housing property and hence could not close the deal before expiry of the validity period of your Pre-Approved Home Loan. Later, you have again applied for a Pre-Approved Home Loan. In this way, it will impact your credit score negatively as you would be considered a credit hungry person by the credit bureaus. Therefore, it should be remembered that frequent applications for pre-approved home loan can lower your credit score.

When the lender extended a pre-approved home loan offer to the applicant, it remains valid for a limited period (say 3 to 6 months) from the date of approval and the applicant is, therefore, required to complete the purchase of property transaction before the expiry of validity period of this approval. So the applicant feels unnecessary pressure of buying the property in a limited period and sometime end up buying a not-so-good property just to close the deal.

You should go through the full details of pre-approved home loan before opting for it. Also, a pre-approved loan should be applied only after you have selected 1 or 2 properties and one out of which you really want to buy.

You must consider following aspects well before applying for pre-approved home loan:

• Do not apply just because others are applying and telling you its benefits
• Select the property to be bought and check its market price
• Should check your loan eligibility and credit score
• See whether the chosen property which you want to buy fits into your requirement

You should not buy the unwanted property, just to close the deal of pre-approved home loan.