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Having a pre-approved loan application is important especially when borrowing a bigger amount as it increases your chance of getting the loan. However, not all borrowers are eligible so if you’re wondering whether you’re qualified for a pre-approved loan or not, then you’re in the right place.
In this guide, you will learn what a pre-approved loan is about, how to be qualified, and its advantages.
What Is A Pre-Approved Loan?
As the name suggests, a pre-approved loan means that the lender has accorded to provide you a loan for meeting specific requirements. These loans are normally provided by banks to provide convenience to the loan applicants.
Who Meets The Eligibility Criteria For A Pre-Approved Loan?
Having a pre-approved loan offers a number of benefits; however, not everyone is qualified to get it unless the borrower meets the lender’s criteria. Some of this depends on saving history, current balance, good credit history, and income.
Advantages Of Pre-Approved Loan
Unlike the usual loan application process, having a pre-approved loan will make the procedure faster and easier. Since the lender already knows your eligibility amount and is aware of your requirements, the loan can be provided in the soonest possible time.
Lower Interest Rate
Having a pre-approved loan means your requirements match the lender’s criteria, therefore, they’ve already determined your creditworthiness towards the loan. As a result, the interest rate charged to your loan is lower compared to those who don’t have a pre-approved loan.
Normally, a pre-approved loan is given only to the lender’s existing clients therefore, there’s little to no documentation required.
One perk of having a pre-approved loan are that you can get the amount you need without going out of your comfort zone. This means that you can start the loan application online, whenever, wherever you are.
When it comes to loan applications, your credit score is going to matter immensely. A decent score is needed if you want to get approved for credit cards or loans. If you want to get some of the best loan offers out there, you need to have a good or excellent credit score.
Your credit score and your loan application
While it is true that your credit rating is not the only thing that should matter when getting a loan, it plays a huge part. It affects your interest rate, how much you are allowed to borrow too. Our score is likely to differ among agencies too but the better it is, the more you’ll be looked at positively by lenders. The key is for you to look less a risk. If you’ve ever struggled with bills payment or missed some payments in the past, it will have an effect on your score.
Loans available for fair credit borrowers
It is always best to get your score fixed first before you start applying for a loan. But if you cannot really wait that long to get your rating repaired, there are still options out there for you.
These unsecured loans are fixed rate are paid back in monthly payments. They do not require any collateral and it is something one can get from high street banks, brokers, and online direct lenders. These lenders may even cater to those with spotty credit records.
Generally known for the high costs attached to them, these are offered by lenders who are known to cater to low credit borrowers. You do have to prove that you can afford the repayments. The amount needs to be repaid within a short-term too and penalties are high, so proper management of the loan is crucial.
This requires a third party that will promise to cover the repayments for you if you will default. If your credit is spotty, this is one way of ensuring that you’ll appear less of a risk to lenders.