Have you ever been offered a pre-approved loan?

23/02/2021

At some point your bank may have told you that there is a personal loan available for you for a specific amount, that you did not apply for. These are known as pre-approved loans. Based on information the bank has on your financial position, it considers you are solvent and offers to lend you money. Even if your finances are healthy, don’t get carried away by the first impulse and bear in mind the following before you decide:

• First: Do you really need it?  The fact that the bank takes the initiative and makes the approval process easy should not drive you to ask for a loan. Banks engage in lending money, so nothing is better for their business than having a good customer. But loans are not free money and entail much responsibility. In our Take control of your finances post we spoke about the importance of behaving responsibly when making decisions of this kind.
• Second (and equally important): Do you think you can return the loan without any problem? The bank’s analysis is based on the information it has about you through your financial products, but there may be important circumstances only you are aware of. Take everything into account, be responsible and answer this question sincerely and cautiously.
• The bank should also be responsible when granting a loan. This is why the fact that the loan has been pre-approved does not mean that it has been automatically authorised. If you apply for a loan the bank is required to check whether there is any circumstance obstructing the transaction. It will ask you for additional information and documentation to ensure that it complies with its obligation to offer responsible lending.
• Lastly, if you do apply for the loan, be critical with the offer and act as you would in any other case. The fact that the bank has taken the initiative does not necessarily mean that the conditions they offer are the best you can find. Analyse the conditions (fees, APR, etc.) and compare with other banks.