Personal Finance

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How do Pre Approved Personal Loans Work?

Published On Apr/20/2024

What is a Pre-approved Personal Loan?

A pre-approved loan is an offering from lenders who have determined the customer’s eligibility for a loan up to a specified amount after reviewing his credit profile. The best part? There's no need for a formal loan application. This process typically involves a soft inquiry on the customer's credit report, which doesn't impact their credit score.

To determine creditworthiness, the lender assesses various factors, such as the customer's credit score, income, employment history, and debt-to-income ratio. Suppose the customer meets the lender's criteria. In that case, they may receive a pre-approved loan offer indicating the maximum loan amount with the terms and conditions.

Steps to Apply for a Pre-approved Loan

To apply for a pre-approved personal loan, follow these steps.

  • Check Pre-Approval Offer: Start by checking if you have received any pre-approved loan offers from lenders. These offers may be sent via email, SMS, or through the lender's website or mobile app. Review the offer details, including the maximum loan amount, interest rate, and terms and conditions.
  • Confirm Eligibility: Ensure you meet the pre-approval offer's eligibility criteria. It may include factors such as minimum income requirements, credit score, and employment history. Contact the lender for clarification if you're unsure about any eligibility criteria.
  • Provide Necessary Information: If you're interested in accepting the pre-approved loan offer, you'll need to provide certain information to the lender. That may include personal details such as your name, contact information, date of birth, and social security number.
  • Submit Application: Complete the loan application form given by the lender. It can typically be done online through the lender's website or mobile app. Ensure that you provide accurate and up-to-date information to avoid any delays in the approval process.
  • Also Read: How to apply for a Personal Loan online?

  • Review Terms and Conditions: Carefully review the terms and conditions of the pre-approved loan offer before submitting your application. Pay attention to important details such as the interest rate, loan amount, repayment term, and any fees or charges associated with the loan.
  • Wait for Approval: Once you've submitted your loan application, the lender will verify your information and make a lending decision. This procedure may take a few days, depending on the lender's internal processes and the complexity of your application.
  • Accept Loan Offer: If your loan application is approved, thoroughly review the final loan offer provided by the lender. That will include details such as the loan amount, interest rate, repayment term, and any other relevant terms and conditions. If you're satisfied with the offer, you can accept it and proceed with the loan disbursal process.
  • Disbursement of Funds: Once you've accepted the loan offer, the lender will disburse the money to your selected bank account. Depending on the lender and the payment method chosen, the funds may be available to you within a few working days.

Eligibility Criteria

Lenders offer pre-approved or personal loans to customers with solid credit histories and/or positive relationships with the bank.

Credit card companies also extend these offers to customers who have maintained responsible credit card usage over an extended period. Additionally, some lenders may require a minimum balance in the applicant's bank account to qualify for pre-approved loans.

It's important to note that pre-approved loan offers are often available for a limited time, so it's advisable to take advantage of them promptly.

While the eligibility criteria for pre-approved loans may vary among lenders, having an excellent credit history is typically a prerequisite. Lenders generally reserve pre-approved loan offers for customers who have consistently demonstrated timely repayment of their loans.

Maximum Pre-approved Personal Loan Limit

The highest pre-approved loan amount varies for each bank and NBFC. In certain banks, the standardised amount is up to ₹25 lakhs.

Additionally, certain banks offer up to ₹50 lakhs as their highest limit for pre-approved loans.

Differences Between Regular Personal Loans and Pre-approved Loans

Let's check how these loans differ according to the parameters below.


In regular loans, banks typically conduct thorough checks to verify the applicant's employment history and proof of income.

In contrast, pre-approved loans require less stringent assessments. Applicants usually only need a clean credit history and three months of employment status to qualify for the loan. Individuals with no credit history may still be eligible for a pre-approved loan based on their income and savings history.


Pre-approved loans usually require minimal or no documentation and paperwork for approval. However, regular loans involve a more extensive documentation process, requiring borrowers to provide various documents for scrutiny.

Loan Disbursal

Pre-approved loans are typically disbursed within minutes of approval. In contrast, regular loans have longer disbursal times, ranging from a few hours to several days.

Advantages of Pre-approved Loans

Here are some notable advantages of pre-approved loans

Rapid Funding

Pre-approved loans are ideal for addressing immediate financial requirements. Upon approval, the funds are swiftly transferred to your bank account on the same day.

Competitive Interest Rates

Pre-approved loans are extended to individuals with a strong credit history, often resulting in lower interest rates. Lenders are confident in their financial profiles and offer favourable interest rates.

Minimal Documentation

Pre-approved loans require minimal documentation as the lender has assessed your financial credibility. It streamlines the loan processing, making it hassle-free for borrowers.

Disadvantages of Pre-approved Loans

Pre-approved loan schemes also come with certain limitations.

Limited Validity

Pre-approved loans typically have a short validity period. Once approved, borrowers must act quickly to avail of the loan, as the terms may be subject to change or cancellation.

Bank Discretion

The bank reserves the right to withhold loan disbursement until further verification of the borrower's credit score or documentation.

The Bottom Line

Pre-approved personal loans offer eligible borrowers a convenient and efficient way to access funds quickly and easily. By leveraging advanced technology and data analytics, lenders can tailor loan offers to suit borrowers' individual needs and preferences, providing a seamless borrowing experience. Whether planning a wedding, funding a vacation, or consolidating debt, pre-approved personal loans offer a hassle-free solution to meet your financial needs.