If you are looking to avail a personal loan, it is important to have considerable knowledge about the credit option and the whole approval, sanctioning and repayment procedure. Knowing the in and out of personal loan can help you avail it and repay it in an organized manner. It may also assist you in ensuring that you avail of the loan on time and manage it well.
So, what exactly is the process involved in personal loan disbursement? How long does it take for the personal loan lender to sanction your personal loan? Let’s go through the entire application and disbursement procedure to understand personal loans in a better way.
Nowadays, placing an application for a personal loan is extremely easy owing to the rise of digital platforms like Finnable Finance, Incred, MoneyTap etc. Whether you are looking to renovate your house, plan out a vacation trip, fund your child’s higher education or marriage, purchase an expensive accessory or electronic gadget etc., a personal loan is a prudent option to ensure instant cash flow at the time of your requirement. Many lending institutes and banks offer affordable and easy personal loan solutions. Only if you know all the crucial steps involved, you can easily complete the formalities involved in availing of a loan quickly. This guide will help you know the personal loan disbursal process –
Start with the process.
The personal loan disbursement procedure begins with loan application processing. Once the form is submitted, the lender may take some time to review your application to authenticate your credentials. Once the bank or digital lender is satisfied with your inputted details, you can proceed with the next move.
Besides the application form, you will even require submitting a set of important document proof for authentication. Ensure all your documentation is duly authenticated whenever required and updated thoroughly to avoid any type of delay in the procedure. Note that document requirements may change a little from one lender to another, but the basic document requirement will be the same. These include –
∙ Identity proof
∙ Address proof
∙ Bank details
∙ Income proof
∙ ITR or income tax return
∙ 2 passport-size photos
After you have submitted your loan application request along with the necessary documents, the lender initiates the approval procedure. Based on the lender you select, approval might take around 2-3 working days. Approval might take longer if the required documents are not in the correct order. Thus, ensure you thoroughly go through the list of required documents for a personal loan before placing the application for a loan. Note that approval of a loan is faster in case you hold a long-term relationship with the lender in the form of savings or current bank account, fixed deposit, recurring deposit, credit card account etc.
Disbursement of loan
In case your submitted loan application request is approved by the lender, then you will receive an approval letter by mail. The disbursement letter will state that the loan application is approved alongside other important details like loan amount, interest rate, EMIs etc.
Disbursement time for a personal loan may take up to 2 to 7 days after the approval. You may then visit the lender and request a cheque for the requested loan amount. Few lenders even mail you the cheque to your residential or office address. In the past few years, many lenders have even begun crediting the requested loan directly to your bank account.
Disbursed loan proceeds might vary from the sanctioned amount as per the agreement. A sanction letter is a simple notification from the concerned lender stating your eligibility for the requested loan under specific conditions. However, loan amount disbursal is usually subject to different additional formalities that should be met once the loan is processed.
What happens post loan disbursement?
Once your loan proceeds are disbursed, the lender sends you the confirmation letter. Usually, it is mailed over post or email. A confirmation letter generally has a welcome kit. This welcome kit contains detailed info about the loan, EMI repayment options, amortization table, due dates, and other important details.
Once you receive the loan proceeds, you can begin repaying it according to the agreed loan terms and conditions. EMI must be paid on time in full, either through a post-dated cheque or ECS or electronic clearing service. In case you have an account with the concerned bank from which you have availed the loan, you can even fix standing instructions for automatic deduction of EMI on a particular date each month. Repay your monthly EMIs in full by the due date, or else a late payment penalty will be charged, which will not just enhance your overall loan cost but also negatively impact your credit score.
Become informed about all crucial details
It is always great to know all about personal loans before applying for them. In this way, you can make an informed decision. Do not just plainly accept the fees and conditions laid out by lenders. Ensure to properly understand each condition and negotiate for a lower rate of interest if you can. Ensure to completely check your loan documents, particularly the rate of interest, penalty, and repayment options. Doing so will allow you to avoid any kind of errors.
Important key takeaways –
∙ Rate of interest applicable on a loan is based on your credit score, monthly income, and loan tenure.
∙ Repayment procedure takes place to post personal loan disbursement.
∙ You can simply transfer your loan amount from one lender to the next at any time later to avail a lower interest rate once your credit score improves. However, note that when you change your lender, it is treated as a new loan, and all the charges are applied that you initially paid for availing of your personal loan. These additional charges include processing charges, administrative fees etc. Make sure to compute the overall loan cost by opting for the transfer option. Ensure the overall loan cost incurred on the transfer option is lower than the existing overall loan cost that you are bearing. In case it is not, then do not opt for the balance transfer option. Include in the additional charges for calculating your overall balance transfer loan cost.