Personal loans are the most lenient type regarding interest rates and extra fees. It makes complete sense that many borrowers will push their luck to get a personal loan pre approval which is known to propose even better features.
But, there is much information surrounding the process and application, making it difficult to sieve through to the important ones. In this guide, we’ve comprehensively reviewed personal loan pre approval. Here, you’ll find all the necessary options on how to get it, what to expect.
What Is Personal Loan Pre Approval?
Personal loan pre approval is a loan you automatically qualify for without applying. The lenders typically screen multiple prospects monthly and check for those with an optimal credit record. This way, borrowers aren’t the ones applying for loans, and the credit check doesn’t impact their credit score.
These types of loans often come with value-packed offers and terms. So there are juicy offers added to entice the prospects. The proposals can include zero processing fees, no prepayment charges, late fees waiver, etc. Unlike regular personal loans, personal pre approval loans summarize an excellent offer and the best way to get your cash advances.
What Does It Mean When I Am Pre Approved For A Personal Loan?
When you get pre approved for a loan, the credit company will let you have a go based on the information you provide. This process doesn’t generate a hard inquiry, so you don’t have to worry. Your information has been evaluated, and the credit company will let you receive a loan. But you still need to be qualified to get a loan. You still have other steps to take before actually getting the loan options.
After your pre approval, the creditor asks to do a hard credit check on your loan account. This will hurt your credit score at a high rate, so ensure you only grant access when necessary. The privilege of pre approval personal loans is that you have a better and higher chance of getting the loan. But you can still get a denial if your credit or income report changes.
Does Pre Approval Cost Money?
Pre qualification is the first process before pre approval and doesn’t cost any money. But the pre approval process might incur some charges depending on the terms and which lender you’re dealing with. That’s because most of them will want to give you a sneak peek of your offer before introducing any financial commitment.
So, many lenders don’t require you to make a payment to get pre approved, but the cost is usually low for those that do. You can expect to pay between $100 to $1,500 for a pre approval loan process. Sometimes the lenders do it for free, but you’ll have to pay for its extension. You will then need to pay a certain amount to extend your pre approval loan validity.
How Long Does Pre Approval Last?
A typical mortgage pre approval can last between 60 to 90 days, depending on which company is lending. Other lenders keep the window shorter, so you can only use the personal loan pre approval proposal between 2-4 months.
Either way, when your offer expires, you’ll have to contact the credit company again for another one. But this is usually easier because the company will probably have your records on file already.
Some loan providers choose to charge borrowers, though. For example, you might have to pay a certain fee to extend your pre approval loan validity by more than six months. For instance, if you want it to be valid for two more months, you can process the request and pay the renewal fee.
How To Get Pre-Approved For A Personal Loan
Like a loan application, pre approval can be a simple or tiring process. However, you don’t necessarily have to hurt your credit score every time you do it. The process involves an initial soft credit check, which hints at the chances of getting the offer. Be aware that mortgage loans have a greater rigorous process and rate that can’t compare to personal loans.
You need to first get a pre-qualification offer. So the first step is securing a pre-qualification letter. Sometimes the credit company automatically sends you a pre-qualification letter if they think you have a clean record and want to confirm if you can apply for their loan. Follow the steps below to get pre-approved for a personal loan.
Fill In the Pre Approval Form
The first step is to fill out the application form with a lender of your choice. This loan pre approval form requests basic information about your finance. So, here’s where you provide your name, address, occupation, etc. You also provide necessary information about your income, expenses, taxes, and other financial-related details.
This step is often the simplest. The goal is to confirm if you have the basic requirements to get a loan. That’s why once you get pre-qualified, you can still get approved to access the loan. You can fill out the form on the company’s website or visit a physical office. After this process, you’ll know your loan terms, amount, interest rate, and other options you qualify for.
Lender Checks Credit
Once the lender completes the review of your information, the next step is to check your credit and figure out how well you’ve been able to keep a good record so far. This credit check is usually soft, so it doesn’t affect your credit score. However, some credit companies might conduct a hard credit check, so make sure you know which one your lender does before you apply.
Checking your credit history and score takes time. The process requires just a few hours or days. The lender contacts any of the credit reporting agencies to access your history. After carefully evaluating your last records, the creditor decides if your record is clean enough to get approved or if you should try other loan providers.
Lender Sends Pre Approval Letter
The next step is to get the notification letter of your loan pre approval. This letter can be available via email or sent through your mail. The letter’s purpose is to notify you that you are eligible for a loan with the credit company. It also details all the offers you qualify for. You should see how much loan you can take, interest rates, and other details about your request.
Although it might arrive as a regular letter, it’s critical. It allows you to make severe deals with other financial institutions. You can show the letter to the seller or service provider, which informs them that you have worthy credit. It also provides the confidence to step up your negotiation process.
Formally Apply For a Personal Loan
After receiving your letter, it came to stay valid for months. So during this period, you can use the letter to apply for a personal loan with the lenders. The process is like every unique loan application. You can compare. You must provide essential documentation like a government-issued ID, SSN, pay stubs, etc.
However, you know the maximum amount of money the creditor is willing to loan you this time. You also see the rates that apply to your loan. So ensure you keep track of these details, as the actual offer and rate might change during the process. If there is a change in your credit history or income, you might get a different offer when you apply.
What Happens After Applying For Personal Loan Pre Approval
As mentioned earlier, you’ll follow a regular loan application process after your letter arrives. The lenders request information that was separate from the previous process. These include pay stubs, income verification, driver’s license, SSN, tax returns, etc. You’ll also link your bank account for deposit and loan repayment.
Once all your documents are available, the lenders send you a promissory note and other essential documents you should sign. Please pay attention to these documents as they contain crucial information. You’ll get your loan disbursed after the papers return to the loan provider. Depending on the lenders, it can take a day to several business days.
Should I Get Pre-Approved For a Personal Loan?
It’s the best option if you have a clean credit history. Getting pre-qualified is a simple process, but pre approval can be more challenging. If you believe you need a stronger score or record of getting approved, you should stick with a regular loan application. However, a pre approval loan might be an ideal option for borrowers with an excellent financial history.
Alternatively, you should get it if you seek better offers. They are generally known to offer better features and figures compared to other alternatives. Pre approval loan is an excellent way to get better interest rate offers, zero processing fees, longer repayment terms, and higher loan amounts. It’s, therefore, only available for students or people with a credit history.
Pre Approval vs Pre-Qualifying
People often confuse Pre-qualification with pre approval, even though they are pretty different. Compare them. They both serve as preliminary steps to get a loan but have other requirements and processes. The significant similarity here is that Pre-qualification makes you eligible for a certain credit offer, while loan pre approval does the same.
The difference is that pre-qualified users will still have to undergo a pre approval process. Pre-qualification is the first step that informs the borrowers of some of the offers they can access based on their current finance.
After this process, the borrower can get pre-qualified through a soft or hard credit check to confirm if they can get the loan proposal with their record. While pre-qualification tells you what you can get, loan pre approval confirms if you can get them.
Will Personal Loan Pre Approval Affect My Credit Score?
A personal loan pre approval may and maybe not affect your credit score. Unlike pre-qualification, where your credit score is always safe, a pre approval might negatively impact it. That’s because there are different credit companies, each of which has regulations.
On the other hand, some are happy with a soft credit check that provides essential info on your record. Others will want a hard credit check that provides all the information regarding your history. But once you confirm that your lender does a soft credit check, you can rest assured that your credit score will remain intact and unaffected after a smooth review.
Can I Get Pre-Approved For a Personal Loan With Bad Credit?
Yes, you can get a decent proposal even with bad credit. A creditor’s goal during pre approval is to match the prospective borrower with a befitting offer. When you get pre-approved, the lenders will already know your credit score and create a unique proposal that fits your records.
But not every credit companies do this, so you won’t always get a personal loan with bad credit. Therefore, the major challenge is finding the right company that accepts terrible credit options. Another challenge you might face here is that the creditors might request that you put the loan on automatic repayment.
Ways To Increase Your Chances For Pre Approval
You have a series of ways to improve your chances of pre approval. Through conscious or unconscious means, you can increase the possibility of receiving a loan pre approval letter from your lender. Check them out below.
- Improve Your Credit Score: The most efficient way to position yourself as a better candidate for this loan is to get a better credit score. The process requires a soft credit check, and the loan lenders have minimum limits. Increasing your score could help you gain the loan lender’s favor.
- Pay-Off Debt: If you have outstanding debts, paying them off boosts your score and cleans your record. So this makes you more creditworthy.
- Boost Your Income: Your income level is one of the few things considered during pre-qualification. This can increase your offer and prepare you for an eventual loan pre approval letter.
- Add a Cosigner: With a cosigner, the creditor considers more than just your records. Hence, even if you have a bad record, you can boost your chances when you cosign with someone with better credit history.
Pre approval loan has been around for several years but is still a mystery to some borrowers because of the process. It involves providing information to a credit agency, getting approved and boosting your chance of getting better offers than regular applications.
So for borrowers with a good portfolio and financial history, this is a great opportunity. However, it’s still a nice idea if you have a fair history as well. By following the guidelines here, you’ll be able to understand how pre approval loans work and how you can secure one even with bad credit.