It is common to receive an email or piece of mail saying you have been pre-approved for a personal loan of varying amounts. However, what does this really mean? It is important to know the basics about these loans before you commit to them. If you need the money, this could be a great funding option. However, you need to know the advantages and disadvantages so you can make a smart decision about your financial future.
The Basics of Pre-Approved Loans
So, what does it mean to be pre-approved for a personal loan? First off, pre-approved means that a bank has looked at a short list of criteria to determine if they would give you a loan. They look at everything from your income and monthly cash flow to your credit history. However, it is not 100% confirmed money until you apply for funding. A pre-approved loan speeds up the loan application and decision process.
Advantages of Pre-Approved Loans
1). Speedy Processing for Applicants: A financial institution has already confirmed that you are eligible for a loan since they have looked at your record. This means that finding loan approval takes far less time than if you walk into a bank or group that has not already pre-approved you. Additionally, the loan funds are dispersed quicker than usual, so the time between application and receiving the money is cut down. This is important for someone who really needs the funds fast.
2). Low-Interest Rates with Pre-Approval: If you are pre-approved for a loan, the bank wants your business already because you meet the minimum criteria. Thus, you can expect lower interest rates than normal on loans. After all, the bank knows you can afford to repay the funds.
3). Negotiation Power! A pre-approval means that your credit score, income, and credit history all meet the minimum requirements of the bank. Thus, you can negotiate better repayment terms because you already know you are a valuable customer to the organization. They are already willing to give you money, so use this bargaining power to the fullest.
Other Facts to Know about Pre-Approved Personal Loans
1) Get Paperwork in Order: The best way to make a pre-approved loan work for you is to have your paperwork in order. For example, you need your license, proof of income, and identification paperwork like a Social Security number ready to make the processing as quickly as possible. Any discrepancy or missing item could hold you up. Gather everything, make copies, and keep everything in one place.
2). Expiration Date on Pre-Approval: There is most likely an expiration date on the pre-approval loan. Thus, you should pay attention to the offer’s deadline. You will need to apply by a certain time to make the most of the interest rates and pre-approval perks. If you miss this time frame, then it will be harder to get the necessary funding.
3). Pay Attention to Costs: You should always read the fine print of any pre-approval loan. For example, if there is a low-interest rate, there may be other fees that you do not see. Ask about the loan processing fee, repayment terms and more. If you ask, you may be able to waive them, especially since this financial group already wants to do business with you.
You should take the time to read through everything in the pre-approval email or mailing before you make a decision. A little time and research matters. Of course, you do not want to miss the opportunity. Know when you have to apply or commit to this loan option so you do not miss the deadline. If you need funding for something like debt or a big purchase or bill, then this is a great option for you. However, you should not sign up if you do not need the money. These loans have a lot of perks associated with them, but they may also have some downsides too. Make sure you have all of the information and your documentation lined up if you do want to take advantage of a pre-approved personal loan. This means that you can get the best possible rates and terms available.