What does a preapproved loan offer in the mail mean? | finder.com

What preapproved loan offers in the mail mean

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Received a preapproved loan offer in the mail? What it means and what you should do about it.

Among the bills, postcards and letters that come by mail, you might happen upon a letter from a financial institution that announces you’ve been preapproved for a loan. Though it might be tempting to apply right away, take a moment to carefully consider the offer. And if it is legit, remember: there’s no guarantee you’ll be approved for the same amount and terms stated in the letter.

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    What exactly are preapproved loan offers?

    A preapproved loan offer is simply a form letter sent by a bank or other lender as a marketing tool to entice you to apply for a loan. They typically contain an online code or a form for you to complete and send in. Many state that you’ve already been preapproved for a specific amount, which can range anywhere from a few hundred dollars to a large loan worth thousands.

    Despite what the industry calls it, “preapproval” doesn’t guarantee that you’ll get a loan if you apply. When companies extend these offers, they do so with cursory information from either a third party or a soft credit pull. These lenders have determined that you meet the basic eligibility criteria and might meet the financial requirements. Their information for you may be out of date, which means you may not actually be able to receive the advertised loan — or any funding at all.

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    Rates last updated October 19th, 2018

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    Why do companies send out preapproved loan offers?

    Preapproval letters are proven marketing tools designed to attract more borrowers.

    For banks and credit unions that you have an existing relationship with, it’s an attempt to get more of your business. It lets you know that the product exists and that you may be able to get a loan should you need it.

    You can also receive letters from banks that you’ve never done business with or lenders you’ve never heard of. These providers are likely attempting to raise brand awareness. The offers you’re being sent are a way for them to get more exposure and potentially more customers.

    Are mailed offers the same as what’s online?

    Not always. There are differences in the rates offered by mail and those offered online. The better option often depends on the lender itself. Some have better online rates while others offer attractive deal in letters to get you to apply.

    Both use preliminary information about your finances to determine preapproval. Neither guarantees a certain rate or even if you’ll be offered a loan after you submit an application. You’ll still have to go through the full application process and will likely have to submit to a hard credit pull so the lender can confirm that you’re a suitable borrower.

    However, a preapproved offer has two additional benefits: you have an increased chance of approval and the application process will be quicker. Since the lender has already done the work of pulling some basic data on you, it knows that you may meet the criteria to borrow. And since you’ll likely be able to enter a code onto the lender’s website, you may save time by having many of the fields prepopulated for you.

    Is a preapproved loan offer worth pursuing?

    It depends. If you have the time and are willing to do some research, it could be worth applying for a preapproved loan offer. You’ll want to make sure the lender is legit and that you don’t qualify for a better term, but if you’ve been offered a good deal and have solid finances, it might not be a bad idea.

    However, an offer by mail may not be the best you can get. You could benefit from comparing your options online before diving in on an offer sent by mail. You’ll also want to make sure you check to see if the lender is legit. Some scams look like the real deal but end up fake, so always do your research before you hand over any of your personal information.

    How can I tell if this offer is a scam?

    There are several warning signs to look out for when it comes to loan scams. If the lender is offering a 100% guarantee, doesn’t have contact information or wants an upfront fee, stay away. Scammers are notorious for pulling these tricks on people who don’t know better. If you’re not cautious, you could end up wasting money on a cheap trick or giving over your sensitive banking information to a disreputable company.

    The best way to avoid a scam is to familiarize yourself with what a real loan offer looks like and learn about common loan scams.

    Bottom line

    Preapproved loan offers are a form of advertising that is quickly becoming archaic, but that doesn’t make them a bad deal. If you’re in the market for a personal loan, it’s worth it to compare your options online and do a little research. A mailed preapproval might be convenient, but it could also be costly if you accept an offer without knowing the lowest rate you could qualify for.

    Before you jump onto the lender’s website and complete the offer, compare your other personal loan options to see what kind of deals are out there.

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