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Financial institutions and banks offer financial assistance to people at a reasonable interest rate for a specific tenor in the form of loans. These loans can be pre-approved or pre-qualified depending on the applicant’s profile. Generally, many applicants or customers fail to differentiate between Pre-Approved and Pre-Qualified loans. However, these are two different features in loans that you can avail as per your eligibility.
Pre-Approved Loans
Pre-Approved loans known as instant loans are offered to customers with good credit scores and zero defaulter records. With minimal paperwork and zero collateral, banks and financial institutions disburse the loan amount within 24 hours into the applicant’s account without any hassle.
A Pre-Approved loan is treated as a marketing technique to increase loan product sales. Generally, the interest rate offered on Pre-Approved loans ranges between 10.5% p.a – 14% p.a.
Benefits of Pre-Approved Loans
- Instant Fund Disbursal – The loan amount is generally processed and disbursed within 24 hours into the applicant’s account.
- Zero Collateral – Pre-Approved loans do not require any collateral or guarantor against the loan.
- Flexible Repayment Tenor – Customers can choose a loan tenor between 12-60 months depending upon their repayment capacity and financial goals.
- Chance to Negotiate – Pre-Approved loans are generally offered by banks and financial institutions to the customers allowing the applicant to negotiate for the loan amount and the interest rates.
- Additional Perks – Banks and financial institutions include certain perks like EMI holidays, fee waivers, etc. with the loan to make it a profitable deal.
Eligibility for Pre-Approved Loans
- Income Stability
- A good credit score
- Zero defaulter record
- Transaction stability and above-average bank balance
Things to Keep in Mind about Pre-Approved Loan
- Pre-Approved Loans are exclusive deals valid only for a limited time offer. So if you are selected for a Pre-Approved loan by your bank, ensure you ask about offer validity.
- Pre-Approved loans are generally offered on the grounds of the customer’s profile. The banks and financial institutions hold the authority to reject the application, in case there is any discrepancy in the information.
- Understand other processing and administrative fees charged by the banks or financial institutions before sealing the deal.
Pre-Qualified Loans
A pre-qualified loan is generally the initial stage of the loan application where a bank or financial institution executive verbally discusses the loan expectation, income, expenses, and various aspects with the applicant to derive their eligibility for the loan. A pre-qualified loan is essentially the preceding step of pre-approved loans.
In pre-qualified loans, the banks and financial institutions approach potential customers to understand their fund requirements and verbally discuss their financials to evaluate whether their profile can be shortlisted for pre-approved loans.
Benefits of Pre-Qualified Loans
- Online Procedure – The pre-qualification process is generally carried out online or verbally on the call with the bank or financial institution’s executive.
- Free of Cost – Banks do not charge any fee to evaluate an applicant’s profile and financials.
- Quick Functioning – The pre-qualification loan procedure takes 2-3 business days to evaluate the financial health of an applicant.
Eligibility for Pre-Approved Loans
- Income Stability
- Zero defaulter record
- Transaction stability and above-average bank balance
Things to Keep in Mind about Pre-Qualified Loan
- Once the pre-qualification procedure is completed, a pre-qualification letter will be issued for the applicant. This pre-qualification gives you an upper hand during loan approval.
- Applicants who wish to explore loan products of different banks and financial institutions must reveal the pre-qualification letter as it is treated as an offer.
- The banks and financial institutions hold the authority to reject or dismiss the pre-qualification letter, in case there is any discrepancy in the information.
Difference between Pre-Approved and Pre-Qualified Loans
| Pre-Approved Loans | Pre-Qualified Loans |
| In Pre-Approved loans, banks and financial institutions provide detailed information to the potential applicants about the loan amount and interest rates. | In the Pre-Qualification loan procedure, banks and financial institutions verbally discuss the finances and fund requirements of the interested applicants. |
| In Pre-Approved Loans, applicants have an opportunity to negotiate the applicable interest rate on the loan and come to a mutual agreement. | The Pre-Qualification procedure in loans does not offer an opportunity to discuss or negotiate the applicable interest rates on loans. |
| During Pre-Approved Loan application procedures, the applicant has to clearly state their repayment capacity to derive the EMI amount. | In Pre-Qualification loan procedures, the monthly instalment amounts are not evaluated. |
| Upon successful completion of the Pre-Approved loan procedure, the loan amount is sanctioned and disbursed instantly. | Upon successful completion of the Pre-Qualification loan procedure, a pre-qualification letter is issued. |
| A Pre-Approved loan comes with limited offer validity. It is an exclusive offer that is offered to selected customers. | A Pre-Qualification letter does not have any validity attached to it, however, the perks and terms mentioned in the letter are subject to change with the change in norms and policies of the banks and financial institutions. |
