Many people think the loan process is complex and also the waiting period and verification process can be time-consuming. But the best part is absolutely not. The loan disbursement period can vary depending on what type of loan you are taking. In a home loan the process can take time to verify all the things but in a personal loan it can be disbursed within a day and there are not so many documents needed. Let’s understand how a personal loan actually disburses.
What exactly is a personal loan? A personal loan is a type of loan that doesn’t need any collateral and the best part is that you can use it for almost anything such as weddings, travel, medical emergencies, and others. You repay the loan through monthly payments (EMIs) over 1 to 7 years. Because it doesn’t require collateral, personal loans usually have higher interest rates than secured loans, like home or car loans.
Before diving into the disbursement process, you should know the eligibility criteria for obtaining a personal loan
Age: Generally, applicants should be between 21 to 60 years old.
Income: A stable income is necessary. Salaried employees, self-employed individuals, and professionals can apply.
Credit Score: A CIBIL score of 750 or above increases your chances of approval.
Employment: For salaried individuals, a minimum of two years of work experience is usually required, with at least six months at the current job. For self-employed individuals, proof of a stable business income is necessary.
Bank Relationship: Having a pre-existing relationship with the lender can sometimes lead to better terms.
The first step is applying for the loan. Here’s how it typically works:
Banks and financial institutions offer personal loans with different interest rates, fees, and repayment terms. It’s important for you to compare offers from several lenders to get the best deal. Compare and apply for the best loan Here.
Go to your lender's website and check what are the eligibility criteria. You can also read Here to understand the general eligibility criteria for personal loan.
By providing basic details like your income, age, and loan amount, you can quickly see if you qualify for a loan. This step can save time by narrowing down your options.
Once you’ve chosen a lender, the next step is to gather the required documents. These typically include:
Identity Proof: Aadhaar card, PAN card, passport, etc.
Address Proof: Utility bills, rent agreement, or passport.
Income Proof: Salary slips, bank statements, or Income Tax Returns (ITRs).
Employment Proof: Offer letter, appointment letter, or business proof for self-employed individuals.
Photographs: Recent passport-sized photos.
You can apply for a personal loan online or offline. The application form will require personal, employment, and financial details. Make sure to fill in the correct information to avoid delays in processing.
After submitting the application form along with the necessary documents, you will receive an acknowledgment from the lender. This acknowledgment document will include an application reference number, which you can use to track your application status.
Once the application is submitted, the lender will start a short verification process to make sure that the information provided is accurate.
The lender verifies the documents submitted. This includes cross-checking identity, address, and income proofs. Some lenders handle the process online, while others may send someone to collect and verify your documents in person.
The lender will check your credit to see how reliable you are. They’ll look at your credit score, past loan payments, and current debts to decide if you can repay the loan.
The lender might contact your employer to confirm your job, income, and job stability. This is most important because lenders prefer borrowers with a steady income.
If the lender is happy with the verification, your loan application will be approved. The time it takes to approve the loan can vary based on the lender and the accuracy of your information.
After your loan is approved, the lender will let you know by email, SMS, or phone call. They will provide details such as the loan amount, interest rate, loan term, and EMI.
After your loan is approved, you’ll need to sign a loan agreement. This document explains the loan terms, such as the interest rate, repayment schedule, penalties for late payments, and any extra charges. Make sure to read it carefully before you sign.
To make EMI payments easier, the lender might ask you to set up a NACH mandate. This lets them automatically take the EMIs from your bank account on the due date.
Once the loan agreement is signed, the lender disburses the loan amount. Here’s how it works:
The time it takes to get your loan money depends on the lender. Some banks give you the money within 24 hours of approval, while others may take 2 to 7 business days.
The loan amount is usually sent directly to your bank account. Sometimes, the lender may give you a demand draft or a cheque instead.
The disbursement amount is the loan amount minus any processing fees, insurance charges, or other fees. Make sure you know about these deductions before the money is given to you.
After the loan is given to you, you start paying EMIs according to the agreed schedule. Usually, the first EMI is due 30 days after the loan is disbursed.
Several factors can influence the time it takes for your loan to be disbursed:
Accuracy of Information: Providing accurate and complete information speeds up the verification process.
Documentation: Submitting all required documents will facilitate approving the loan quickly..
Credit History: A strong credit history can lead to quicker approval and disbursement.
Lender Policies: Different lenders have different processing times. Choose a lender known for quick disbursement if you need funds urgently.
| Step | Details |
|---|---|
| Eligibility Check | Age, income, credit score, employment status. |
| Application Submission | Fill out the application, submit required documents. |
| Verification Process | Document, credit, and employment verification. |
| Loan Approval | Approval notification, signing of loan agreement, NACH mandate setup. |
| Disbursement of Funds | Funds credited to bank account, EMI schedule begins. |
| Factors Affecting Disbursement | Accuracy of information, documentation, credit history, and lender policies. |
So, now you have understood how the process is. Just remember a few steps compare the lender, eligibility check, application submission, verification, and loan approval. Every step, from checking if you qualify to applying, getting approved, and receiving the funds, is important for a smooth loan experience. Being well-informed and prepared will help you manage the process easily.
The disbursement process includes the lender approving your loan, checking your details, and then sending the money to your bank account or giving you a cheque.
It usually takes 1 to 7 business days to receive the funds after your loan is approved, depending on the lender and how complete your documents are.
Most lenders transfer the loan amount directly to your bank account. Some may issue a demand draft or a cheque.
Yes, fees like processing charges, insurance, and other applicable charges may be deducted from the loan amount before disbursement.
The EMI schedule usually starts 30 days after the loan amount is disbursed, but it can vary based on the lender’s terms.
Yes, you may need to set up a National Automated Clearing House (NACH) mandate to allow the lender to automatically deduct EMIs from your bank account.
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