Pre approved loans are meant to divide the loan approval process into two parts-taking away the hassles that come all at once to you in general. The loan approval process involves clearing your profile, which is the in principle approval, and then looking at all other aspects, including the verification of the security that you offer, verification of your documents, your co-borrowers’ and guarantors’ profile check etc.
Now that this facility is available to you, the question is, should you actually avail it? Consider this. You avail a pre-approved home loan, and then get going for searching the property of your choice. And you do not find an appropriate one. What happens the? One, that the processing fee the banks take while pre-approving loan goes waste, because it is non-refundable, and two, that you ‘credit hungry’ nature is reported to credit bureaus, which leads to fall in your credit score.
Now let us take a scenario where you find a suitable property but the documentation is not clear. What happens then? The same conditions repeat.
Another thing to keep in mind is that pre-approval is valid for a specific time period, usually six months. In case you are not able to finalise your loan security and other conditions, the pre-approval goes invalid. If you wish to take the process forward, you will have to apply again.
When you decide whether to take a pre-approved loan or not, try looking at whether you require it genuinely. In case you do, and you feel that you will be able to complete the process within the timeframe of validity, you should go in for it. The only trouble is, you should be able to predict correctly, the loan amount that you require and the interest rates being offered to you. Find out interest rates from other banks also and keep a track of the expectations of market interest rates. In case they are expected to go down and you are being offered a fixed rate of loan, negotiate for a floating rate instead, to make it a win-win situation for you. If you have come across a property, the selling deed of which depends upon the speed with which you can arrange for funds, a pre-approved loan would come handy.
You must understand that even if your loan is pre-approved, you would still need to carry out the entire process of documentation. Also, in case your documents are found discrepant when the next level is being processes, your pre approved loan could very well get cancelled, and you would require applying for it afresh. In that case, it makes more sense in not taking pre-approval.