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'Your personal loan is pre-approved' sounds easy, fast, and hassle-free. But is it really as beneficial as it seems? Sometimes, this very offer can lead to financial problems later on. Knowing the truth is therefore essential.

In today's digital age, mobile phones receive all sorts of messages, from shopping offers to credit card offers. But there's another message that many people are receiving these days: the 'pre-approved loan' message. At first glance, it seems like you'll get money without any hassle. But this seemingly easy offer can sometimes become a major problem in the future.

A pre-approved personal loan, as attractive as it sounds, isn't as straightforward as it seems. Behind terms like low EMIs, instant money, and no paperwork, there can be several conditions and hidden costs. Therefore, before saying yes to any such message, it's crucial to understand the truth.

What is a Pre-Approved Personal Loan?

A pre-approved personal loan is an offer that a bank or finance company decides on beforehand based on your profile. This offer is given based on your credit score, banking history, salary, and past transactions. However, 'pre-approved' doesn't mean the money will automatically be credited to your account. Before taking the loan, you have to agree to the terms and conditions, and the final approval depends on these.

1. Low EMI doesn't mean a cheap loan

People often say yes immediately upon seeing low EMIs. But a low EMI often means a longer tenure, and a longer tenure means more interest. Therefore, don't just look at the EMI; see how much money you will have to pay in total over the entire loan period. Also, understand whether there is an option to change the EMI or reduce the tenure in the future.

2. What happens if you miss an EMI?

Sometimes, circumstances arise where you can't pay the EMI on time. In such cases, the lender's behavior matters a lot. Some companies immediately impose heavy penalties, and your credit score can be negatively affected. Therefore, before taking a loan, it's essential to check the lender's reliability, customer support, and penalty rules.

3. Pay close attention to the interest rate

Often, people are happy just seeing a low interest rate. But a big question here is whether the interest rate is fixed or floating? Sometimes the rate is low initially, but it increases after a few months. The actual interest rate may vary depending on your job, income, and credit score. Therefore, instead of trusting the interest rate quoted over the phone, it is wise to get all the information in writing.

4. Confusion regarding the loan amount

Many people think that they will receive the entire loan amount that has been approved. But the reality is different. Processing fees, insurance charges, and other fees are deducted beforehand. As a result, the EMI remains the same, but the amount received is less. Therefore, before taking a loan, be sure to ask how much net amount you will receive after all deductions.

5. Will there be a charge for early repayment?

People often don't want to continue a personal loan for the entire tenure. Sometimes they receive a bonus, sometimes their salary increases, and they want to pay off the loan early. This is where prepayment and foreclosure charges come into play. Some loans have a lock-in period, some do not allow part payments. Sometimes a loan with a slightly higher interest rate but flexible terms can be cheaper in the long run.

Not haste, but prudence is necessary

Pre-approved personal loans offer convenience, there is no doubt about that. But blindly trusting them is not right. Make a decision only after thoroughly understanding the interest rate, fees, terms, and conditions. Taking some time to compare different options can help you choose a loan that is not only easy but also safe and affordable.

Frequently Asked Questions (FAQs)

1. Is a Pre-Approved Loan really available without verification?

No, this offer is based on your profile, but final approval is given only after you agree to the terms and conditions.

2. Is a pre-approved loan cheaper?

Not necessarily, sometimes processing fees and hidden charges are added, which can increase the total cost.

3. Does taking such a loan affect the credit score?

Taking out a loan itself won't harm your credit score, but missing EMI payments or making late payments can.

4. Can a pre-approved loan be closed early?

Yes, but many lenders charge prepayment or foreclosure fees, so it's important to check the terms and conditions beforehand.

5. Should you trust every SMS or call you receive?

Absolutely not. Always verify the offer on the lender's website or through their bank app.