You received a loan offer in the main. Find out what it is and what your next step should be.
Snail mail can come with all kinds of trash. We’ve all stood by the mailbox and ripped up those free all-expense-paid trips for two before promptly recycling them. Among the bills, postcards and letters, sometimes there are mail offers from financial institutions. These packets and letters sometimes announce boldly that you’re pre-approved for a loan.
If you receive one of these, you’ve likely built up some credit and might even be a homeowner. Offers can be from a bank you’re affiliated with or even a lending company you’ve never heard of. Read further to find out how these financial institutions get your information, what pre-approval means and if the offer you received is worth exploring.
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You could borrow up to $35,000 for a variety of purposes, with rates from 5.99%–35.99%%.
- Recommended Credit Score: 640 or higher
- Minimum Loan Amount: $2,000
- Maximum Loan Amount: $35,000
- Loan Term: 3 or 5 years
- Turnaround Time: 1-3 business days
- Simple online application process
- No prepayment penalties
What exactly are pre-approved loan offers?
Mailed-out pre-approved loan offers typically contain an online code or a form for you to complete to apply for a loan. The hook is that you’re already pre-approved for a specified amount that can be anywhere from several hundred dollars to tens of thousands of dollars.
Despite what we call it, “pre-approval” does not 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 potential lenders have determined that you meet the 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 Their information for you may be out of date, which means you may not actually be able to receive the advertised financing.
Whereas a “hard pull” refers to a potential lender contacting the three major credit bureaus to get your credit score, a “soft pull” is an inquiry into your credit history that does not affect your credit score. Credit card providers and other lenders often conduct soft pulls of your credit without you knowing it, typically to determine whether you’re borrowing material. Pre-approval and credit card offers are often a result of these soft pulls on your credit.
Why do companies send out pre-approved loan offers?
Pre-approval mailers are proven marketing tools — pure and simple. For banks and credit unions you have an existing relationship with, it’s an attempt to bring their way even more of your business.
However, you can receive letters from banks that you’ve never done business with or lenders you’ve never even heard of. Rather than encouraging repeat business, these providers are likely attempting to raise brand awareness. In other words, the mailers are a way for them to get more exposure and potentially get more customers.
Perhaps the offer is a pre-approved loan for up to $15,000 at a solid rate. If you’ve had a major purchase on your mind or if you’re considering debt consolidation, it could be rather tempting. The most basic point of the offer is to attract more borrowers, whether you know the lender or not.
Advantages of pre-approved loan offers
A primary benefit of being pre-approved for a loan is that you have a higher chance to receive a loan in an amount you need. Additionally, pre-approved offers typically expedite the application process by pre-populating the application form once you’ve inputted your unique offer code.
If you didn’t already know of the lender, you may learn about a new provider that fits your needs. In that case, the lender has benefited from successful marketing.
What to watch out for
Accepting a mailed offer just because you’re pre-approved might not be the most sound idea. You’ll want to be cautious to be sure the offer isn’t a scam.
First, your pre-approval letter could be an attempt to get you to give up personal information that could then be used illegally. The scam could be a tool to open up accounts in your name, or the scammer could sell your information. Either way, not a good time.
To avoid these types of scams, double-check any information you receive. If your pre-approval is from a well-known bank, you can call and ask them about the promotion. Also search online to see if you can find independent reviews of a lender you aren’t familiar with.
5 warning signs of a loan pre-approval scam
There’s also the possibility that the rate you’re approved for isn’t the best you can get. In the same way that you probably wouldn’t buy a TV based on one ad, it might serve you well to shop around. Many lenders are available that can offer online pre-approval as well.
Is a pre-approved loan offer worth pursuing?
If you have the time and are willing to do some research, it could be worth pursuing a pre-approved loan offer. Remember that an offer by mail may not be the best offer you can get, which means you could benefit from fully comparing your options online before diving in on it.
There are several warning signs to look out for when it comes to mailer scams. One big warning sign is if the company asks for an upfront fee to provide you with a loan. You can follow our guide to learn more about what makes a legit offer and what to be wary of.
Are mailed offers the same as what’s online?
Not always. You’ll find differences in the rates offered by mail and those offered online. Depending on the lender, you may find that either carries a better — or even the same — offer.
The common thread between the two offers is that they both use preliminary information about your finances to determine pre-approval. Neither guarantees a certain rate or even guarantees you’ll be offered a loan once you submit the full application.
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Bottom line
Mailers are a form of advertising that’s becoming archaic. And pre-approval offers are just that: advertisements. If you’re in the market for a personal loan, it could be worth it to compare your options online and do a little research. A mailed pre-approval might be convenient, but it could also be costly if you accept an offer without knowing the lowest rate you could qualify for.
