Personal Loan Disbursement: A Step-by-Step Guide
The loan disbursal process can seem straightforward—you apply for a loan, it gets approved, and the funds are deposited into your bank account. However, the journey from loan approval to receiving the funds involves critical steps.
As a borrower, one should have clarity on expected timelines and requirements that can help you plan better through the personal loan disbursal process.
This article provides a comprehensive guide to the typical stages involved in the disbursal of a personal loan.
Step-by-Step Process of Personal Loan Disbursal
Below is the process of disbursing personal loan:
Step 1: Personal Loan Application
The first step is to apply for a personal loan that matches your financial needs and repayment capability.
- Compare interest rates, loan amounts, fees, and other charges offered by different financial institutions, such as banks, NBFCs, and fintech firms.
- Choose a loan provider that offers the best terms and a loan amount you can comfortably repay.
- Please complete and submit the personal loan application form with all required details—personal information, employment details, income, existing loans, assets, etc.
- Ensuring accurate information in the application form is crucial for faster processing and approval.
- Most loan providers today provide the convenience of applying online by visiting their website.
Once you submit the personal loan application, the financial institution will start processing it to check your eligibility.
Step 2: Document Verification
After submitting your loan application, you must submit specific documents to verify your credentials in the application form.
Key documents required at this stage generally include:
- Identity proof - PAN Card, Aadhaar Card, Passport
- Address proof - Voter ID, Passport, Aadhaar Card
- Income statements - Salary slips, Form 16, ITR
- Bank statements - Latest 3-6 months statement
- Existing loan details - Account statements, repayment track record
- Business proof - (for self-employed)
- Any other documents requested by the loan provider
It’s important to ensure you submit clear copies of currently valid documents. Double-check to avoid any mismatch with the initial application details. Don’t forget to proactively track with the financial institution if any other documents need to be submitted.
Step 3: Credit Assessment
The financial institution will conduct a detailed credit assessment based on your application and submitted documents to check your repayment ability.
- Your credit score and history will be checked to assess past repayment behavior. A score above 750 can help get faster approval.
- Your total income, savings and current debt obligations are evaluated to determine the debt-to-income ratio.
- Overall financial health is based on assets, liabilities, and income stability.
The financial institution may contact your employer or references to validate your credentials for background verification. The credit assessment helps the loan provider determine your loan eligibility and the loan amount that can be safely disbursed.
Step 4: Personal Loan Approval
Once the financial institution is satisfied with your creditworthiness based on the assessment, it will approve your personal loan application.
You will receive a loan sanction letter/email with details like:
- Loan amount approved
- Interest rate
- Processing fees
- Repayment tenure
- EMI amount
- Other applicable charges
At this point, you should carefully review the loan terms and offered amount and check if they align with your requirements.
The loan approval stage concludes the initial process and sets the ground for the next steps involved in disbursal.
Step 5: Acceptance of Loan Terms
The legal formalities and paperwork begin once you accept the personal loan offer.
The financial institution will share a final loan agreement that details all terms and conditions. Go through the agreement carefully before signing to ensure complete clarity on:
- Interest rate - fixed or floating
- Processing fee and other charges
- Repayment schedule - EMIs due, tenure
- Foreclosure charges or pre-payment penalties
- Lender’s rights in case of default
- Submit signed copies of the loan agreement to the loan provider via post or visit the branch.
- You may need to submit post-dated cheques (PDCs) for the EMI amounts as per the repayment schedule.
The legal formalities must be completed properly before the disbursal process can begin.
Step 6: Personal Loan Disbursal
Once loan agreement formalities are completed, the loan provider will process the final disbursal based on the loan approval terms.
- The loan amount approved, after deducting the processing fee, will usually be transferred to your bank account within 7 days.
- You will receive a confirmation from the financial institution once the loan amount is disbursed.
- Check your account to ensure the full approved amount has been credited by the financial institution.
Disbursal time can typically range between 2 and 10 days, depending on the financial institution’s process. Follow up regularly for quicker disbursal.
Step 7: Post Disbursal
- After you receive the loan amount in your account, ensure to use it for the intended purpose as per the loan agreement.
- Begin planning your repayment right away. Set up standing instructions or auto-debit to avoid missing EMIs.
- Stay disciplined in repaying the loan per the schedule to avoid late fees or penalties. Maintain a good credit score.
- Login to the financial institution’s portal to keep track of repayment dates, total outstanding amount, etc.
Tips for Faster Disbursal
Here are some tips to expedite your personal loan approval and disbursal process:
- Maintain a high credit score.
- Provide complete documentation upfront.
- Select loan providers that offer faster disbursal.
- Opt for pre-approved loan offers from existing banks.
- Avoid new credit applications during loan processing.
Conclusion
The personal loan disbursal process involves 7 key steps - application, document verification, credit assessment, approval, acceptance of terms, disbursal and post-disbursal. Understanding the timelines and requirements at each stage will help set proper expectations. Follow through efficiently on requirements from your end to get the funds disbursed into your account faster. Assess your needs, compare loan providers and apply wisely, keeping repayment ability in mind.
