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How to get “pre-approved” for a personal loan
What you'll need to know to get the early green light from a lender.
What does loan pre-approval mean?
When you initially apply for a personal loan, your application generally won’t be approved immediately. Pre-approval is the intermediate step between applying for a loan and being fully approved and having your loan funded. Pre-approvals are also available with many other types of loans, car loans, mortgages and even credit cards.
Most online “eligibility checkers” will end with either a pre-approval offer or a denial based on your basic financial situation. If you’ve been pre-approved, the lender will then invite you to submit the actual loan application. The lender will then perform a full credit check, and although it’s not common, pre-approvals can become rejections at that point.
Pre-approved loans can also refer to any unsolicited offer you receive from a lender in the post or via email. These are used to encourage potential customers who may not have previously considered borrowing to apply for a loan.
You’ll then generally have a couple of months to submit a full application, but will need to meet all of the lender’s requirements. Even if you receive a pre-approval notice, you still may not qualify for a loan if your application fails to satisfy the loan eligibility criteria.
How does the pre-approval process work?
You can find out if you’ll be eligible for a pre-approved loan by completing the following steps:
- Find a lender.
- Fill out an “eligibility checker” form.
- Wait while the lender reviews your application. This process is usually automated.
- Receive your pre-approval decision.
- Complete the official application.
Alternatively, a good “matching service” can check your eligibility with multiple lenders in a matter of minutes.
It’s worth noting that in many cases, pre-approval takes place online within just a few minutes. This is because the lender and its underwriting team haven’t evaluated your application yet and are using software to analyse the information you supply. On-the-spot pre-approvals are often nothing more than indications that you may qualify for a loan.
If you’ve received a letter from a lender that says you’re pre-approved, then this process doesn’t apply to you. The lender has used information available to them to determine that you may be eligible for one of their products.
Your lender will likely contact you to confirm the information you’ve submitted if you’re pre-approved for a loan. Be sure everything is accurate. At this point, your lender may take a day or 2 to fully underwrite your loan application, but you may still be denied. If you do receive an official approval, review your contract carefully and decide if you still want to move forward with the loan.
Compare personal loans with pre-approval
Table: sorted by representative APR, promoted deals first
Please note: You should always refer to your loan agreement for exact repayment amounts as they may vary from our results.
Late repayments can cause you serious money problems. See our debt help guides.
Is there a difference between conditional approval and pre-approval?
Yes, while both terms are used often, they actually refer to slightly different types of approval.
Pre-approval is the lender’s initial check to confirm your credit score, income and personal details align with the lender’s qualification criteria, and is often done automatically.
Conditional approval is when an applicant needs to supply extra information to the lender to support their application. This may include pay slips, bills and employment records. If you’ve received conditional approval, it generally means that the lender is likely going to approve your loan, but still needs to gather specific information for its underwriting team before your loan can be funded.
Some personal loan lenders will use the terms interchangeably. If you’re still confused after receiving pre-approval or conditional approval, don’t hesitate to contact your lender and clear up any questions you may have.
How do lenders identify customers to offer pre-approved loans to?
Banks and lenders possess quite a lot of information about their customers and will use this knowledge to promote various products.
For instance, you might have an account with a particular bank. Consequently, the bank will have a lot of information about you, from your earnings to your expenses. The bank will also be aware of your interests and spending habits.
Based on this information, the lender may try and entice you into taking out a loan or other credit product. This is why banks and lenders often send letters, emails or even make phone calls regarding new products and conditional pre-approvals for loans. They make this decision based on your credit score and the personal information you’ve supplied to other lenders.
Benefits of pre-approved loans
- More certainty. If you seek out pre-approval, it can help you feel more confident when making a decision between different loans. You’ll know that a lender is likely to lend you the funds you need, and you’ll have an estimate of how much the loan will cost you. Choosing the right loan can be difficult, but already knowing your potential interest rate and the fees attached to the loan can help you make the right choice for your finances.
- Protects your credit score. Making multiple loan applications in a short space of time can have a damaging affect on your credit rating. By checking your likelihood of approval before you submit a full application, you can avoid applying for loans that you’re likely to be rejected for, and the negative impact this can have on your credit.
What do I need to submit for a pre-approval application?
You’ll need to provide the following information when you apply for loan pre-approval:
- Your name, date of birth
- Your contact details, including your address, phone number and email
- Your employment details, including your current employer and income
- Your financial details, including your expenses and debts
Lenders provide pre-approvals based on your application. If it’s inaccurate or missing details, a lender won’t be able to offer you pre-approval. Be sure to take the time to gather the necessary documents so that your application is as accurate as possible before you begin.
How to avoid denial of a pre-approval application
Lenders may decline pre-approval applications for any reason. Some common ones are:
- You haven’t supplied the proper documents for validating your income
- You have a low credit score
- You have too many inquiries on your credit report
Just because you’ve been pre-approved before doesn’t mean you will be again. Lenders have strict eligibility criteria, and you’re not guaranteed to receive a loan even if you’ve been pre-approved.
What else to watch out for
Always be wary of a lender’s reputation. Check customer reviews and the lender’s website, and never agree to a loan from a lender that you don’t trust. It may seem obvious, but there are scams out there that look legitimate.
Some disreputable lenders will even send postcards in the mail or forward an email that mimics a real lender. Confirm that these pre-approval offers are real before proceeding with a loan application – especially if it asks for your personal information.
Frequently asked questions
We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.
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