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Thursday, September 22, 2011

What is Pre - approved loans?

For buying a House, pre-approved loans the banks/ finance institute require all the documents, which are required for regular loans.
Here, the only difference is that most of the documents are required at the time of disbursal of the loan amount, after you finalise among others.

No guarantee...!

A pre-approved loan is just a promise and not a guarantee.Hence,  banks reserve the right to cancel the pre - approved loan, because of genuine reasons.
For an example, one person finalise the flat, he want to buy it. Same time the bank/finance institute does not find the title of the flat satisfactory, it may withdraw the pre- approved loan.
Pre- approved loans come with an additional cost. It is in the form of pre-approval loan facility charges. This provides loan assurance before it's actually availed.

According to Reserve Bank of India (RBI) directives, the maximum pre-approved loan facility charge can be 1.5% of the total loan amount and most banks cap it to the maximum limit. So, while pre -approved loans have merits, ignorance of above mentioned factors could lead to a serious mess.

For example, banks charge a processing fee on each pre-approved loan, which is valid for a specific time frame. A person failing to identify the property he wishes to buy within the time frame would have to get the loan approved again, that means by paying the processing fee once again. so, beware of Pre -approved loans


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