Top News

In today's digital age, mobile phones are constantly bombarded with shopping offers and credit card deals. But another message that's becoming increasingly common is the "pre-approved loan" message. At first glance, it seems like an easy way to get money without any hassle. However, this seemingly simple offer can often lead to significant problems in the future.

Pre-approved personal loans, while sounding attractive, are not as straightforward as they seem. The promises of low EMIs, instant money, and no paperwork often hide several conditions and hidden costs. Therefore, it's crucial to understand the reality before immediately accepting any such offer.

What is a Pre-Approved Personal Loan?

A pre-approved personal loan is an offer that a bank or finance company determines based on your profile. This offer is made after reviewing your credit score, banking history, salary, and past transactions. However, "pre-approved" doesn't mean the money will automatically be deposited into your account. You still need to agree to the terms and conditions before the loan is disbursed, and final approval depends on these terms.

1. Low EMI Doesn't Mean a Cheap Loan
People often jump at the chance of low EMIs. But low EMIs usually mean a longer tenure, and a longer tenure means more interest. Therefore, don't just look at the EMI; consider the total amount you'll have to repay over the entire loan period. Also, understand whether there's 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 your EMI on time. In such situations, the lender's behavior is crucial. Some companies immediately impose heavy penalties, which can negatively impact your credit score. Therefore, before taking a loan, it's essential to check the lender's reliability, customer support, and penalty policies.

3. Pay Close Attention to the Interest Rate
People often get excited by low interest rates. But a crucial question is whether the interest rate is fixed or floating? Sometimes, the rate is low initially but increases after a few months. The actual interest rate may vary depending on your job, income, and credit score. Therefore, instead of relying on the interest rate quoted over the phone, it's wise to get all the details in writing.

4. Confusion regarding the loan amount
Many people think that the entire approved loan amount will be credited to their account. 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 the net amount will be after all deductions.

5. Will there be a charge for early loan 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, and some do not allow partial 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's 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 will help you choose a loan that is not only easy but also safe and affordable.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.