When a lender reaches out to you with a loan or credit card offer without you applying for one, such an offer is categorised as a pre-approved offer. Lenders often reach out with such offers to those who have maintained a good credit profile, seem to have a stable source of income and have proven their creditworthiness through their past credit behaviour. So, unlike a regular loan or credit card approval process that begins the preliminary screening after you initiate it by applying for a line of credit, the pre-approved offers are initiated by the lenders after reviewing your credit profile.
How is Your Eligibility Determined for Pre-approved Offers?
While any lender has the ability to extend a pre-approved offer to you, such offers are often made by banks or lenders with whom you have a positive track record. They may offer you a loan for a specific amount or recommend credit cards based on factors such as your account balance, credit score, employment history with recent salary records, and previous loan repayment history. If you have managed to maintain a high credit score of preferably 750 or above, made timely repayments of previous EMIs or credit bills without missing or delaying them, and have a good credit history, then the chances of you receiving pre-approved offers from banks, marketplaces like Paisabazaar, or other NBFCs, increase.
However, accepting a pre-approved offer does not make your application immune to rejection, nor does it entail guaranteed success in securing a loan or getting a credit card. Instead, such offers merely increase your chances of approval as, if you go ahead with the offer and apply, your application and the submitted documents are further evaluated based on the lender’s other internal policies.
Should You Opt for Pre-approved Loan or Credit Card Offers?
As listed below, the pre-approved offers have their own set of advantages that you must consider before disregarding any such offer that might be extended to you:
Higher Approval Rate: The lenders only make these offers to those who seem eligible for a loan or credit card after the initial level of screening. Hence, the chances of getting your application approved are higher with a pre-approved offer than if you apply for a loan without one.
Quicker Processing: Since the initial screening process has already been completed before the offer was made to you, the processing and final disbursal of loan or credit card is much quicker once you accept the offer and proceed with the application process. So, if you were already looking to apply for a loan or credit card and wish to avail it sooner, then opting for a pre-approved offer would be better.
Better Deals: As the lenders themselves initiate the offer from their end, you have a comparatively better chance of negotiating a deal with them. Pre-approved offers can give you leverage to get a loan with better terms, like lower interest rate and a suitable repayment plan for you. In case of credit cards, you may be able to negotiate a higher credit limit too.
Also Read: The right way to get the first credit card and build a credit history
Things to Keep in Mind
While these points make the pre-approved offers an advantageous deal, you must also be cautious and keep in mind the following factors before you accept any such offer:
Analyse Your Own Needs: Even if the pre-approved offer is quite tempting, you should first analyse your own requirements. Irrespective of a good deal, all forms of credit are always accompanied by additional interest changes that you will have to pay in addition to the principal amount borrowed. So, go ahead with an offer only if you really need the loan for a financial emergency or can benefit from the credit card offered.
Verify the Terms of Offer: A pre-approved offer might appear to be quite lucrative, but you should always exercise caution before accepting them. Going through the detailed terms and conditions associated with it is imperative before taking any decision.
Compare Offers: Accepting the first offer you come across may not let you get the best deal. It is advisable to compare offers from different banks or lenders, so that you can select the one that best aligns with your needs.
To conclude, pre-approved loan and credit card offers can prove to be quite helpful and profitable when chosen mindfully. You can avail a pre-approved loan if you have any financial emergency that requires a considerable sum and if its terms match with your requirements and repayment capacity. While a pre-approved credit card offer should only be accepted if you can maximise the card’s benefits based on your current spending patterns and budget.