New Delhi, March 26 -- The phrases "pre-qualified" and "pre-approved" are commonly used in the context of personal finance, especially when applying for personal loans. Despite their apparent similarities, they are actually separate steps in the loan application process. Making educated borrowing decisions requires an understanding of the subtle differences between these concepts.

A lender tests a borrower's initial data on the pre-qualification level in order to check how much the borrower is qualified for. The process would normally include:

Pre-approval is used to accelerate the actual approval process by establishing the credit history and willingness of the borrower to proceed with the loan application. A process involved under thi...