In the banking sector today every bank needs more and more customers in order to maintain its name and position in the market. The major source of earning for the Banks is the interest which they collect from the loan lent to various sectors. Therefore, banks always remain in search of potential loan customers either from their own base or from the market, who have good credit history and to whom they can easily lend money without having to check too many details.
A Home Loan is sanctioned to a person who is an existing customer of the bank (especially on a loan product or a credit card) and therefore the credit behavior can be established. In addition the customer’s overall credit behavior across other loan products can be established basis his CIBIL score.
There are various merits associated with a Pre-Approved Home Loan. Some of these are:
- Less verification is required, therefore it saves time.
- Good bargaining power: the customer has an opportunity to bargain for the interest rates and other charges as he is a trustworthy customer in the bank records.
- Client gets ample time to select a suitable property: as the time which would have been wasted in doing the documentation for understanding eligibility and fulfilling other requirements can now be better utilized for property search.
- It further strengthens the relationship between the bank and the customer.
However, in spite of the various obvious merits, there are also some demerits associated with availing a Pre-Approved Home Loan.
- Need and availability of the loan amount may differ: Loan amount is already specified therefore in many cases the loan which is available to the customer may not fulfill the customer’s need.
- The customer may get misled as easy availability of the loan amount may lead him to buy an expensive home. Such loans also come with a limited period offer and the client in the hurry to avail the loan, may end up buying a more expensive property than required and also get burdened with servicing a higher than affordable EMI. This could prove to be a bad decision sometimes.
- Sometime when a customer is offered a Pre-Approved Loan, he may get lured by easy availability of finance and may not survey the market to check if a cheaper / better finance option is available.
Keeping in mind the above mentioned points, it is important that a customer who is offered a pre-approved loan actually spends time and effort to survey the market for all available options and also ensure his EMI affordability before signing up for the pre-approved offer.