Do you also get confused when you see Pre-Approved Loan messages? Learn what to do in such situations.

What To Do With Pre-Approved Loan Messages: How beneficial is a pre-approved personal loan? Find out why banks send such offers, when it's right to take a loan, and in what situations it's wise to hold back.

What To Do With Pre-Approved Loan Messages: If you use your bank account regularly or have a decent credit card history, you've probably seen messages on your phone like "Pre-approved personal loan," "Money in one click," "No documents required." These offers often arrive when a person is feeling a little financially strained. That's why these offers seem so tempting. But what's readily available isn't always the best option. So let's find out why we receive such messages and what to do in such situations.

Why does the bank offer you a loan itself?

The bank offers these loans because it already knows you. It has complete data on your salary, spending habits, existing EMIs, and credit card usage. Based on this, the bank estimates how much loan you can take and how likely you are to repay it. This reduces the bank's risk, and the loan is disbursed quickly without much scrutiny. Personal loans are unsecured and carry higher interest rates, making them a profitable deal for the bank.

Is a pre-approved loan cheaper?

Often, people assume that pre-approved means a better deal, but that's not always the case. The interest rates on these loans are often average or even higher. Additionally, processing fees, add-ons like insurance, and other terms and conditions increase the overall cost. This is because the customer doesn't compare offers, and the bank isn't under pressure to offer the cheapest option.

When can this loan be the right choice?

If the need is clear and for a limited time, such as a medical emergency, essential family expenses, or a short-term cash crunch, and the EMI won't disrupt your monthly income, then this loan can be helpful. For those with a strong credit profile, taking a loan from their own bank can be easier from a management perspective.

When is it wiser to stop?

An easy loan taken simply for "just in case" situations or lifestyle expenses can become a long-term burden. If you already have several EMIs running or very little savings, another loan can weaken your financial situation. This is especially true if you plan to take a larger loan like a home loan in the future, as a personal loan affects your eligibility.

What to consider before taking a loan?

If you had to apply for this loan in person, would you still take it? If the answer is no, then perhaps you don't need it; only convenience is tempting you. It is crucial to read the key facts statement, understand the total annual cost, and review the terms and conditions. A loan taken with the right intentions becomes a support system; otherwise, it becomes a source of worry for years.

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