Applying to the loan pre-approval process is an essential step to receiving personal loans, especially when you are a single mother and need emergency cash. While it appears to be a dividing line, the process differs from being officially granted.
Pre-approval lets you look around for various personal loan lenders without damaging your score. However, this isn’t a promise to get approval for personal loans. You must be aware of some things, including factors like annual percentage rate, prepayment penalties, and repayment terms.
What is Personal Loan Pre-approval?
A pre-approval is the first step in obtaining approval for personal loans with a co-signer. “It’s important to do a pre-approval first, to be sure of what you’re doing,” says Trina Patel, Financial advice manager of Albert, an app for managing money. During this phase, personal loan options are presented, and lenders may perform a soft pull on your credit, which does not have the same impact as hard credit inquiries.
If you are looking at loan options and requesting pre-approval, multiple lenders conduct an informal credit assessment that won’t affect your credit score. Having an excellent credit and a strong credit profile can increase your chances of getting a Pre-approved Loan. To qualify for a same-day personal loan, complete the online application before the cut-off time.
When you request a personal loan pre-qualification, it will result in the process of a hard credit check, which is a negative one, and will stay on your credit file for as long as two years. It is why assessing your chances of approval beforehand is essential.
The process of getting pre-approval is and should always be entirely free. In pre-approval, the lender will review your credit scores, credit history, income, and other financial assets. They may also review your financial history to comprehensively understand your credit profile.
The goal is “to determine whether you’ll be capable of repaying your loan,” Patel says.
Suppose you decide to accept the personal loan offers. If you are eligible for pre-approval, your lender will issue you an offer letter including the loan amount, rate, and conditions. Remember, sometimes a credit card can also be an alternative if a personal loan doesn’t fit your needs.
In that case, you must complete the formal application procedure that requires you to submit documentation, including pay stubs, IDs, and a Social Security number. It will typically happen within a business day.
Remember that pre-approval doesn’t constitute a guarantee. “It does not guarantee that you’ll be accepted,” says Tara Alderete, manager of learning and enterprise in Money Management International, a non-profit financial counseling and educational agency. “If you get approval, but something happens in your credit or income ratio, then you could be denied that credit,” says Alderete.
How To Apply For Pre-Approval Personal Loans
The general rule is to follow the procedure for applying for a pre-approval of a personal loan, also called the pre-qualification process.
- Complete the formal loan application for pre-approval through a lender’s website:
Lenders will ask about your earnings, employment status, and debt; however, you don’t have to submit any proof of income at this period of time. Lenders will usually offer flexible terms during this phase.
- The lender will perform a soft credit inquiry to check your creditworthiness, which won’t affect your credit score. Based on this, they will determine your eligibility for loan funds and provide a conditional pre-approval. The lender will look at your credit report, including your monthly payment history, and determine if you’re a dependable borrower. It is important to consider auto loan options with an online lender, as they can cater to bad credit borrowers.
- You can get a pre-approval If you meet the criteria:
If you’re eligible for pre-approval, lenders will offer auto loans containing the maximum loan amount it is willing to extend and the interest rate of any other loan term. Online lenders have specific eligibility requirements that you need to meet. If you don’t get through the soft credit screening, the application will be rejected.
- Take a choice:
You may choose to take the pre-approval or decline it. The lenders differ in the length of time a pre-approval will last, and the likelihood is that it won’t be longer than one month. Keep in mind the monthly payment option before making a decision.
- Offer documentation:
If you accept the offer, you must submit documents that demonstrate your earnings, employment, or assets, along with personal details like your Social Security Number. It will help the online lender assess your application and finalize the auto loan process.
The procedure to apply for pre-approval seems simple. However, there are some points to remember when looking for and selecting an individual loan officer.
Begin your personal loan application journey by filling out an online form to check if you have a pre-qualified offer. It will give you an idea of the terms and conditions of a particular type of loan.
Don’t choose the first lender to offer you pre-approval. Explore other lenders and discover the different types of loans available.
We suggest seeking personal loan approval from credit unions, banks, as well as aggregators of lending (like LendingTree), peer-to-peer lenders (like LendingClub), and special lenders (like SoFi). Make sure you cast as wide an eye as you can.
There’s no limit on the number of pre-approvals you can apply for. Since pre-approval is a soft credit check, filling out more than one application won’t affect your credit. In the event of a bad credit score, some lenders may still provide you with options or advice on improving your chances of approval. If you have an excellent credit history, you may receive attractive loan offers with lower interest rates and flexible terms.
“That’s what’s so appealing about the pre-approval method,” Alderete says. “You will have a clear picture of what the personal loan will be like without damaging your credit score.”
Read the fine print carefully and the loan terms.
Make sure you understand the basic requirements and terms associated with each loan offer you receive.
Review the offer thoroughly before you accept the offer. It is essential to ensure the amount of loan and the Competitive Rates you want to align with your needs. However, you’ll also review the other terms for the loan, including the origination fees.
(one-time cost to complete the loan, typically between 1 and 10 percent of the amount of the loan) and penalties for prepayment (a charge imposed on those who are borrowers to pay off the entire loan in advance).
“You must ensure you’re not subject to any of these penalties,” Patel says. “If you can make your loan payment sooner or put an extra amount towards your loan, the chances are you’ll be able to do so without having to pay more.”
Make Sure That The Pre-Approval is Expired Before You Take The Offer: Personal Loans
A pre-approval deal will not last for long. It’s impossible to apply for pre-approval for a personal loan and wait in the waiting room for a few months. Ensure that you are prepared to accept the Loan proceeds once the personal loan funds are released by the network of lenders. It is crucial to fulfill obligations and pay the loan on time to maintain a good credit standing.
“You’ll have to make the decision swiftly, generally within about a week or so,” Patel says. Loan providers are aware that financial conditions are subject to change, so lenders offer pre-approval loans, which are usually quick-term solutions to assess the possibility of paying back the loan.
You can take out more cash than you’ll need
A potential borrower with a good credit score could be pre-approved for more than they initially requested. But even if you can get a higher loan isn’t a guarantee that you must take the offer. Maximum loan amounts may be tempting, but you should consider your needs and stick to the minimum loan required.
“If I had a plan to obtain a personal loan of $5,000 to repair my home, I would not want to take anything more than that,” Alderete says. “That’s one of the problems people get through — they want $5,000 and are granted $10,000 and end up in greater debts than had planned.”
A qualified borrower should communicate with the lender’s customer service and ensure they receive the appropriate loan amount for their needs. With proper planning and discussion, borrowers can complete this process n a matter of minutes and result in a larger loan only when necessary.