A Personal Loan is what you can easily take to fulfil your needs. It’s best to borrow money when you want to return it through equated instalments. Many banks and financial institutions give Personal Loans at affordable interest rates. But before applying for one, you must thoroughly understand the Personal Loan disbursement process.
So, what is the Personal Loan disbursement procedure? How long will it take for the lender to pay out your loan? Let’s go through everything you need about Personal Loans to understand them better.
Preparing to Apply for a Personal Loan
The first step is finding the right lender to offer you a Personal Loan at terms that work for you. Once you have found the lender, you must gather all the documents along with the Personal Loan form.
These are some of the documents that banks usually ask for:
- Identity proof (Aadhar card, passport, voter ID, etc.)
- Address proof (Aadhar card, passport, utility bills, etc.)
- Income proof (salary slips, ITR forms, bank statements, etc.)
- Employment proof (offer letter, appointment letter, employment contract)
Submitting the Application and Required Documents
You can apply for the loan if you have all the required documents to submit to the lender. The lender will then check your eligibility and run a credit check.
Getting approval is one of the primary steps of the Personal Loan disbursement process. The loan approval procedure begins once you’ve submitted the application and documentation. The lender will start the approval process after submitting your application and documents. Approval can take 2-3 business days, depending on which lender you choose. If your papers aren’t in order, approval may take longer. So, double-check all of the necessary paperwork before submitting your loan application.
If you are a current lender client, approval is more likely to be quicker. For example, consider applying for a loan if you have a Savings or Salary Account at the same bank, consider applying for a loan there.
Signing the Loan Agreement
Once you have accepted the loan terms, you must sign a loan agreement and Personal Loan form. These will contain all your details, such as the interest rate, repayment schedule, etc.
Personal Loan Disbursement Process
If your application for a loan is approved, the lender will issue you a sanction letter via email or regular mail. The sanction letter will confirm that your loan application has been accepted, including additional information such as interest rate and loan amount.
After approval, Personal Loan payments are generally made in 1-2 business days. In recent years, most lenders have started paying the money straight into the customer’s bank account. Some lenders send you a cheque by mail. You may then collect the cheque for the loan amount by visiting the lender.
What happens after Loan Disbursal?
Once you get the loan disbursed, you can start using the loan amount for your desired purpose. But you need to repay it in EMIs. So, the first EMI deduction from your account is on the date mentioned in the sanction letter.
The repayment process is quite simple and easy to follow. All you need to do is make sure to have enough balance in your account on the day of the EMI deduction to be processed smoothly without any issues.
Personal Loan Prepayment
Although Personal Loans are unsecured, some lenders might charge a prepayment fee if you want to close your loan before the end of the tenure. This fee is generally 1-5% of the outstanding loan amount and compensates the lender for the loss of interest they would have earned had you continued to repay the loan as per the original repayment schedule.
While some lenders do charge a prepayment fee, many don’t. So, checking with your lender before closing your loan is recommended.
Personal Loan Transfer
Personal Loan transfer takes your existing Personal Loan from one bank and transfers it to another bank that offers you a lower interest rate. It will help you save money on interest payments in the long run.
The process of transferring a Personal Loan is quite simple. All you need to do is apply for a Personal Loan at the new bank, and once your application is approved, the new bank will pay off your old loan and issue you another one at a lower interest rate.
However, it is essential to note that not all banks allow Personal Loan transfers, and you might have to pay a prepayment fee to the old bank to close the loan before the end of your tenure. So, it would be an excellent decision to take advice from your lender before applying for a Personal Loan transfer.
The Personal Loan disbursement process is relatively straightforward. Hopefully, the information we provided has been helpful, and you will find the entire process easy to navigate.
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