Pre-approved loans and their advantages

A pre-approved home/personal/car loan is usually offered by banks to those people who have a clean track record of loan repayment history. Usually banks pre-approve a loan to its own customers based on conditions like income and expenditure or repayment history in case of credit cards. However, once offered the pre-approved loans must be accepted within a given time limit.

Pre-approved loans are of two types – unsecured and secured. Unsecured loan is mainly personal loans and credit cards. Secured loans include car loans and home loans.

Eligibility

A bank will generally judge your eligibility based on your track record with the bank. When you approach a bank for a loan, the bank will get your credit score from the Credit Information Bureau (CIBIL). For secured pre-approved loan, banks also do an asset quality check. The bank will check the kind of asset you want to buy with the loan—whether a car or house. The loan will be sanctioned and disbursed only if it fits certain predetermined criteria.

What is pre-qualification?

Pre-qualification is a loan eligibility estimate by the bank based on your current earning power, credit score, financial history etc.

A pre-approval certificate is a written guarantee given by the bank after the bank conducts an employment, remunerations and credit worthiness check by collecting past financial data like loans and credit card repayment history, credit score, disposable income, tax returns, current debts, etc. Choose a bank with a competitive interest rate and a good reputation in the market.

Advantage of pre-approved loans

• One of the advantages of pre-approved loans is that it helps you assess your spending limit. It means that you have a clear understanding of what you can afford and that influences every aspect of your home search.
• A pre-approved certificate helps you book your home and formalise your purchase as soon as you have shortlisted a home.
• A pre-approved loan makes you a highly credible buyer with builders and can also be a factor in negotiation.

In today’s real estate market, getting a pre-approved home loan is an easy way to buy your dream home. A pre-approval for home loans prepares you to select your home within a known budget and helps you figure out your choices and act accordingly and in a timely fashion.