The three different types of loan approval are:
- Pre-Approval:The lender assesses your financial situation based on the information you provide (such as income, credit score, and debt) to determine whether you are likely to qualify for a loan. Pre-approval typically involves a soft credit check and does not guarantee full loan approval. It provides you with an estimate of the loan amount you might be able to borrow and gives you an idea of what interest rates you could receive.
- Conditional Approval: This type of approval happens after you apply for a loan and the lender has reviewed your application and supporting documents. The lender agrees in principle to lend you the money, but this approval is subject to you meeting certain conditions. These conditions may include providing additional documentation or verification of your financial status. Once you satisfy these conditions, the loan is typically finalized.
- Final Approval (or Full Approval): This is the final step of the loan process. Once all conditions are met, and the lender has fully reviewed all documents and verified the information, they will issue final approval for the loan. This means the loan is fully authorized, and the borrower can proceed with receiving the funds as agreed, often followed by the signing of the loan agreement.
Each stage represents a different level of commitment from the lender, with final approval being the most binding.