The one thing that individuals often do before taking a loan is to check the norms on the website and than apply for a loan.
Sundar was looking to take a home loan and he had heard about pre-approved home loans. So, he decided to visit the bank's website, fill-in the form and in a few minutes, there was a notification that his home loan was pre-approved.
Let us first see how pre-approved loans work?
The first thing in that there is no guarantee that you would get a loan. Even the website, which displays that the loan has been approved, clearly mentions that this is subject to certain conditions. So, you need to first fulfill certain conditions to finally get the amount disbursed from the bank.
The one thing that the bank does is that it studies your credit score and knows that you are credit worth. The rest of the compliance is required. Let's cite this with an example. In the above example, Sundar does get a pre-approved home loan done. But, what if he does not comply with other things. For example, if he is looking for a home loan and the property title of the concerned builder is not clear, the bank would never ever disburse the loan.
What if the bank feels he needs to create a greater level of insurance to protect himself. He has to comply with these requirements, before he can get his loan passed.
What are the characteristics of a pre-approved loan?
1) There is a time limit for the pre-approved loan. For example, if its validity is for one month, you need to apply and get disbursement within a month.
2) Quick and fast approval.
3) You have to satisfy other conditions, before you avail this loan.
4) All types of loans are eligible.
Why you should get a pre-aproved loan?
1) It cuts processing time
This one definitely cuts the processing time. The basic details are with the bank and it can begin work immediately.
2) Helps you to negotiate better
Those with a prea-approved home loan, can negotiate better with a builder for example. They can thus get the best deal that is available.
It is important to clarify that it is not compulsory to seek a pre-approved loan. There are some advantages though, but, if you want to finish the process in one final shot, you can do that as well.