A financially strong and credit-worthy borrower attracts the attention of lenders, as such borrowers are more likely to repay their loans and not default. So, instead of waiting for people with good credit to come to them for a loan, credit unions/banks go to people with good credit and offer them loans that have already been approved.
Should you accept a pre-approved loan offer? How must you evaluate the request? Let’s find out.
What Are Pre-Approved Loans?
Pre-approved loans are frequently agreed upon by the lender and are subject to eligibility requirements and applicable terms and conditions. Credit Unions/banks usually know about the borrower’s creditworthiness when they make pre-approved loans. They are aware of their credit score and income, for example. However, documents such as an Income Tax Return (ITR) and proof of your most recent income may still be required to verify repayment capacity and current income status. A credit union/bank may offer you a pre-approved loan, which can be secured or unsecured. For example, you could be offered a pre-approved home loan, a car loan, a bike loan, a personal loan, and so on.
Who Receives a Pre-Approved Loan Offer?
Members, bank account holders or borrowers with loan accounts who have good credit have a better chance of receiving a pre-approved loan offer. Some pre-approved offers are time-limited and will expire after a certain period. Individuals with a high credit score, no loan default history, a high ITR income, or a large account balance are more likely to be offered a pre-approved loan.
Loans Pre-Approved vs. Regular Loans
The credit union/bank already knows about the candidate’s eligibility in the case of a pre-approved loan. In contrast, the credit union/bank receives the loan application first and checks the applicant’s eligibility. When you receive an offer for a pre-approved loan, the loan amount, interest rate, and charges are already disclosed, whereas, with regular loans, the loan amount is unknown at the time of application. It is determined by factors such as the applicant’s credit score, age, and existing debt obligations. If you decline a pre-approved loan, it does not affect your credit score. But applying for other loans will impact your credit score in a small way.
Why Pre-Approved Loan?
Getting a pre-approved loan can help you get a flexible repayment schedule. Because credit unions/banks trust your creditworthiness, you will have flexible repayment terms or loan tenure. It can range from 1–4 years. You need to think carefully about the length of your loan so you don’t fall behind on your payments.
You are eligible for this offer because of your good credit score, which allows you to get competitive interest rates on these loans. The lender would offer low-interest rates on pre-approved loans because of your clean financial record. It would help you make your loan payments on time and avoid going into default.
If you are looking to take advantage of pre-approved loan options, you can visit Heritage Financial Credit Union. Whether you are looking for personal loans or auto loan financing, Heritage FCU offers a wide range of options to choose from according to your needs.