If you’re looking to renovate your home, secure a debt, or have unexpected cover payments, a personal loan would be suitable for financing these requirements.
In this article, we are discussing the advantages and disadvantages of pre-approved personal loans.
What is a pre-approved personal loan?
A pre-approved personal loan is an offer extended up front by the lender to selected customers. It is a shortcut to a personal loan. Quite a few banks and NBFCs offer pre-approved loans, which require no security or collateral and have minor documentation.
Before accepting any pre-approved offer, study the disadvantages and advantages of pre-approved personal loans.
Advantages of a pre-approved personal loan
Applying for a loan can be comparatively simple if your loan is already approved. This also reduces your processing and funding time considerably.
You can use this personal loan amount for any purpose, be it education, a vacation, buying a gadget, home improvement, etc.
You can lower your overall interest amount by merging various debts into one debt.
If you have a good credit score, you can negotiate competitive personal loan interest rates on the loans. Because of your reputation of having a clean financial record, the lender would offer you low-interest rates on pre-approved loans.
No collateral is required
Collateral means an asset that a lender gets as security for a loan you own if you default on their loan payments. As most personal loans are unsecured, you don’t need to provide the lender with any collateral to support your loan. However, as no collateral is required, the lenders may charge you a higher personal loan interest rate than secured loans.
Borrowers with a minimum CIBIL score can also qualify for a personal loan. However, the higher your credit score, the more likely you are to get a lower interest rate on your sba startup loans.
Pre-approved offers are promotional offers mainly to increase sales. The lender may lower the EMI and personal loan interest rates, and it can help you save some money.
EMI calculators are beneficial when calculating the EMIs for personal loans. The online Bajaj Finserv EMI Calculator displays the break-up of the loan amount, tenor and interest rates. You can even check your monthly EMI that is applicable online.
Pre-approved personal loans have multiple advantages but certain disadvantages as well.
Disadvantages of pre-approved personal loans
Considering possible disadvantages is also vital when deciding on a personal loan.
Specific fees are applicable when you take a personal loan: application fee, repayment schedules, pre-payment penalty, foreclosure charges, etc. Ensure to ask the lender about all the applicable charges associated with your loan. Negotiate with the lender to waive these fees; you’d be surprised when it works.
Higher interest rates
Personal loans do not have collateral backing, so lenders consider them a risky investment. They are inclined to charge higher personal loan interest rates than secured loans.
A personal loan, if not repaid on time, impacts your credit score. Any late loan payments or mislaid payments may likely lower your credit score. Better still, set up an automatic bill pay system so that your EMIs will be on time.
Read Also: Avail Hassle-free Pre-approved Personal Loans from Bajaj Finserv
Before you borrow, you may consider the following:
- Assess your financial situation before obtaining a personal loan
- Can you afford loan outgoings?
- Have another look at your monthly funds and ensure that you are not stretching yourself beyond reach.
- Consider saving the same amount every month, equal to the estimated personal loan payment that would have been enough to meet your considerable expense.
- Saving ahead helps you stay away from the loan interest.
- Depending on your savings account, you even earn dividends throughout the time.
- If you do not have a strong credit score to qualify for a competitive personal loan interest rate, consider raising a tiny amount before applying for your loan.
Now that you know that you are eligible to get a personal loan, browse around, explore, and consider your needs vs wants. Reach for the loan and remodel your bathroom or go on the vacation of your dreams.
Additional Read: Avail Easy Loans with an Instant Loan App in Simple Steps