When it comes to the point of making a purchase or shelling out for a luxurious expense, it is more than likely that we will look to use credit to ease the financial impact. When we make the application, lenders will assess our creditworthiness and potentially confirm “pre-approval”. Not everyone knows exactly what this means, however.
In basic terms, pre-approval is the lender’s way of confirming that your preliminary application has been accepted. The details which you provide are the fundamental pieces of information used to determine the amount, terms, and conditions of a loan. Whether you are applying for payday loans or an installment loans online, this is usually always the case. There is additional information a lender will ask to see before they commit to paying out, however.
Am I obliged to take the loan following pre-approval?
No, there is no commitment to taking a loan despite being pre-approved. There is no contract signed, which means that there is no legal agreement between you and the lender. Many borrowers apply for loans and credit cards just to see if they will be accepted. A high number of these same people do not follow up on taking out the loan.
When does loan status change from pre-approved to approved?
A lender will only commit to approving a loan once they have satisfied their own requirements. As the basic information they have on you – for the most part – is unverified, they will need to conduct checks and receive documents which prove that the information is correct. Before this is done, the loan will remain in the “pre-approved” status.
What is the information I will be asked to provide?
Typically, you will be required to confirm you are who you say you are. Identification, proof of address (or residence in the state that you live in), details of income, bank details etc are the most common things which will need validation. If you are unable to – or refuse to – provide this information, the likelihood is that you will not be approved for the loan.
Do requirements change depending on the type of online loan?
For the most part, no. Lenders have the responsibility to know this information, as cannot make a reasonable judgment on your ability to make repayments. Installment loans, payday loans, traditional loans and credit card applications made online will all require that you prove who you are and can demonstrate your capacity to afford the loan repayments.
Pre-approval does not guarantee that you will get the loan
It will almost certainly guarantee that you will not get the requested amount, at least. With pre-approval, the lender is making a statement to you confirming that the information you have provided would indicate a satisfactory reaction from the lender. It is then up to you to convince the lender that you can prove those same details are correct.
Even when you provide the requested details and documentation, a lender may choose to change the terms. This is not to say that you won’t get what you are looking for, but understanding that pre-approval is essentially an opening of the door to a loan should help you manage your expectations.