What is the Complete Disbursal Process of a Personal Loan?
Personal loans are a popular loan option for people across the country because they have faster disbursal time, are unsecured and flexible. The current generation also prefers personal loans for emergency funds, marriage, travel, and other miscellaneous costs. Most of the people thought that availing a personal loan is a tough and time taking procedure.
However, it is necessary to have an awareness of the entire loan disbursal process so that they can be prepared beforehand for the loan.
Below are a few of the most critical parts of the loan disbursal process.
Complete Disbursal Process of a Personal Loan:
- Loan processing:
Assuming that your documentation is in order as per the lender’s requirement, and your loan is approved, it would typically take about 24-72 hours for the fund’s release from the lending institution.
The loan amount disbursed is done through NEFT straight into the bank account of the borrower, or a demand draft will be released, which the borrower can collect from the lending institution.
Do remember one thing, if the loan application is incorrectly filled, or the documents required by the lending institution are not complete, the chances are that the loan application may get rejected.
- Loan amount:
Note that the loan amount applied for would be credited to the borrower’s account after a few deductions like insurance charges, service tax, etc.
In some cases, the first EMI is also deducted from the loan amount, and the remaining amount is credited to the borrower’s account.
It is a good idea to check with the lender to know what are the charges that require immediate payment.
- Confirmation from the lending institution:
The borrower will receive a confirmation from the lender once the loan is successfully processed.
The confirmation email/letter and would comprise a welcome kit.
The welcome kit usually contains the particulars of the personal loan.
These would include loan tenure, amortization table, EMIs payable and due dates, login and passwords to the online account details, and other information required to keep track of the loan.
- Repayment during the loan tenure:
The borrower is expected to repay the loan based on the EMI calculated. It is a monthly installment which the borrower is required to pay on or before the due date.
The lender will fix the due date, and the borrower has the option of making:
- ECS payments directly to the account,
- go for an auto-debit option wherein the EMI amount is deducted from a corresponding account on the due date
- submission of post-dated cheques at the time of loan approval
The option is pre-decided between the borrower and lending institution.
For example, if the borrower agrees to post-dated cheques for a loan take for 12 months, then the lender will require the borrower to submit 12 post-dated cheques.
- Post-disbursal penalties:
A penalty is applicable if the borrower fails to pay the EMI amount on the date specified by the lending institution.
The due date is a non-negotiable date for repayment EMI date as per the agreement signed by both the parties.
For example, if the borrower has agreed to post-dated cheques, then they need to ensure that their account has the required balance to make the payment.
Apart from a penalty, a bounced cheque will lead to a lower credit score, and this will impact the eligibility of future loans.
This is the golden rule – repay your EMIs as per the deadline to avoid penalty and a negative impact on the credit score.
Hence, it is important to know the amount to borrow.
How much to borrow?
The repayment capacity of the borrower decides the loan amount.
Generally, if there is no other loan, most lending institutions will assume that the borrower requires 50-70% of their current income as expenses.
The remaining amount is taken into consideration to calculate the EMI and loan amount.
Conclusion:
Digitization has made the loan disbursal process faster and simpler.
The infusion of technology has made the loan application, loan process evaluation, approval, disbursal, repayment, and closure processes more accessible than ever.
Various banks and NBFCs are ready to provide competitive personal loan interest rates.
The lending institutions are also flexible in terms of tenure, repayment dates, etc.
Hence you need to assess various options of finances and choose your banking partner wisely.
That being said, the entire loan disbursal process needs to be known well before applying for the personal loan to reduce complexities.
Category: Loans
