Life can throw unexpected financial emergencies at us - whether a car breakdown on the way to work or unforeseen medical bills. In such situations, taking a loan from a financial institution can be a saving grace for many. Nowadays, most financial institutions have simplified processes for swift and trouble-free loan disbursals.
So, if you are looking for a step-by-step guide to getting a personal loan, this post will help you understand how to get one.
What is a Personal Loan?
A personal loan is a type of loan that individuals can borrow from banks, NBFCs and credit unions to meet personal financial needs without the need for collateral. Unlike loans for specific purposes like home or car loans, a personal loan can be used for various reasons, such as medical emergencies, debt consolidation, home improvements, or travel.
Personal loans are usually unsecured, so you don't need to provide collateral like a house or car to get approved. Instead, the lender looks at your credit score, income, and financial history to decide if you qualify. The loan is then paid in fixed monthly instalments over a set period, typically one to five years, with interest added.
Personal Loan Application Process
These days, applying for a personal loan is easy, seamless and quick through the online process. The steps to apply for a personal loan process are as follows:
- Step 1: First, visit the bank or financial institution's website to apply for a personal loan.
- Step 2: Verify all your details like name, address, etc.
- Step 3: Next, select the loan amount you want and tenure.
- Step 4: Confirm the bank details with which you want funds.
- Step 5: Once the verification is completed, you will receive the amount in the bank account within a few days to week, depending on the policies of the institution and your financial profile.
You can also apply for a personal loan through the offline method. Here is the process:
- Step 1: Visit the branch of the financial institution.
- Step 2: Complete the application form and submit the same to the representative.
- Step 3: Submit the required documents and provide additional information as requested by the lender.
- Step 4: The lender will review your personal loan application and process it accordingly. Once the loan is approved, you shall receive the funds through fund transfer to your desired bank account.
Disclaimer: Please note that these steps are a general framework. The exact process may vary with the financial institution.
Points to Remember Before Applying for a Personal Loan
Here are some of the key points every individual should consider before applying for a personal loan:
Assess Loan Requirement
First, evaluate why you need fund and whether a personal loan is the best option for you. List all alternative financing sources, such as savings, credit cards, family loans, etc., and see if anything better suits your purpose in terms of cost, tenure, etc. Take a personal loan only for essential long-term financing needs that cannot be met otherwise.
Check Your Eligibility
Review typical personal loan eligibility norms related to age, income, employment stability, credit score, etc. This will give you a fair sense of your qualifications and prospects with banks and NBFCs before applying. If any parameter seems inadequate, try strengthening your profile first.
Estimate Affordable Loan Amount
Do not randomly pick a loan amount. Carefully assess your income streams and current obligations to estimate what EMI figure you can pay every month comfortably without impacting other goals or lifestyles. This helps finalise an optimal loan amount aligned to repayment capacities.
Research Interest Rates and Terms
Furthermore, interest rates and charges vary widely across financial institutions. Thoroughly research interest rates, processing fees and terms of significant banks and NBFCs against your profile. Identify options that offer the best overall deal for parameters like tenure flexibility, fast approval, and competitive pricing.
Check Prepayment Options
Additionally, clarify if the lender permits partial or complete foreclosure of the loan without penal charges. This provision gives the flexibility to repay faster with lump sum payments and save on interest costs later when funds permit. Pick loan providers with minimal or no prepayment/foreclosure fees.
Conclusion
Applying for a personal loan is straightforward when you follow the above steps. From determining your needs to receiving the funds, each stage is crucial in securing a loan that fits your requirements. By understanding the process and preparing well, you can ensure a smooth and quick personal loan application experience.
FAQs
1. What documents are required for a personal loan application?
The documents generally required are identity proof, address proof, income statements (salary slips/IT returns), bank statements, and, optionally, a guarantor letter based on your profile. Keep scanned or photocopied documents ready.
2. How can I check my eligibility for a personal loan?
Review the advertised eligibility criteria by banks and NBFCs related to parameters like minimum monthly income, employment history, credit score, maximum age at loan maturity, etc. Self-assess if you qualify for all mandatory parameters.
3. What is the significance of the personal loan application form?
The application form captures all your personal, employment, and financial details, which the lender will verify via documentation. Ensure every detail you fill out, including income, existing loans, etc., is accurate.
4. What kind of verification happens after applying?
After you submit your application, banks will independently verify your credentials and details via income statements, employers, CIBIL reports, etc., before sanctioning a loan amount aligned to your repayment capacity.
5. How much time does personal loan approval take?
Most banks take 1-7 business days to assess applications and provide in-principle approvals once eligibility is met. Actual disbursal timelines after approval may vary depending on further processes. The fastest approvals are possible within 72 hours.
