What is a pre-approved personal loan? Is this better than instant loan? | Mint

Are you planning to raise a personal loan and before you opt for it, you realise that you already have a pre-approved loan offer. Now you are in a dilemma as to whether you should grab it or let it go.

Typically, a pre-approved loan offer charges a higher rate of interest since it is given against your credit card limit. And as we know credit cards loans are given at a higher interest rate vis-a-vis interest on regular loans.

Pre-approved loan vs instant loans: What to choose?

Better deal: You want to apply for a loan of ₹5 lakh and you realise that your netbanking has a pre-approved offer of ₹4.5 lakh at a tempting interest. You would want to grab the offer and arrange the remainder of balance ( ₹50,000) through some other source.

Smaller amount: You want to apply for a ₹5 lakh loan and the available pre-approved loan offer is only ₹2 lakh. Since the pre-approved offer does not solve your problem. You may still want to opt for a regular or instant loan.

High credit score: You require ₹5 lakh personal loan and you have a pre-approved loan offer but the interest rate is exorbitantly high. So, you decide to give it a pass since your credit score is high and are, therefore, confident that you will secure a better deal.

Higher interest: You need ₹5 lakh personal loan and have a pre-approved loan offer for the same amount at a slightly higher rate of interest. However, tempting it may sound, you should exhaust your option of instant loan before you take a final decision.

Miscellaneous expenses: There could be another scenario wherein you could grab a better deal with the financial institution but the processing fee and other expenses would make that an expensive option to go for. So, that could be a deal breaker and you would choose a pre-approved offer instead.

(Note: Raising a loan comes with its own risks. So, due caution is advised)