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A Personal Loan can be the answer to life’s many financial needs. Be it a medical emergency, business expenses, or a milestone event’s planning, you can apply for Personal Loans online or offline and get funds into your account quickly. Today, most lenders in India sanction loans and disburse the loan amount into the borrower’s account almost instantly. But what goes on behind the scenes? Let’s find out what happens after you’ve submitted your Personal Loan application.
Personal Loans and the Post-Application Procedure
Whether you apply for offline or online Personal Loans, the post-application procedure remains more or less the same. After receiving your application, lenders evaluate it to determine your repayment capacity, based on which they decide the interest rate to charge, and the loan amount to extend. Here’s what happens:
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Loan Application Acknowledgement:
Upon receiving your Personal Loan application, the lender sends you an email or SMS (on your provided Registered Mobile Number) or an on-screen message confirming that they have received your loan application. The confirmation message also contains an application reference number, which serves as the official acknowledgement that the lender has received your loan applicatio.
- Documents and Identity Verification
The lender begins the process by verifying your documents for KYC purposes. They assess your identity, address, and income proof documents physically for offline applications. Lenders also conduct the KYC process online, which may be either digital e-KYC, with Aadhaar-OPT verification, or Video KYC, wherein a lender’s representative checks your original ID documents over a video call.
2. Credit Score Analysis
After completing the KYC process, the lender evaluates your credit score – the 3-digit number between 300 and 900, which gives them insight into your creditworthiness. Their credit officers use automated algorithms to pull out your credit report from their preferred credit bureaus (TransUnion CIBIL, Experian, Equifax and CRIF High Mark) to check your score and review your existing debts.
3. Risk Assessment
Using your credit score as a means to evaluate your repayment capacity, the lender assesses their own risk of approving your loan. If your score is high (e.g., above 750 points), the lender deems you a low-risk borrower with high creditworthiness. If, however, your score is lower than 600, the lender may ask you to provide additional documents to evaluate their own risk of lending you the money.
4. Loan Sanction and Approval
Once the lender is convinced of your loan repayment capacity, the lender officially proceeds with approving your Personal Loan application. The lender extends a loan offer via a letter, also known as a loan approval notification, comprising details such as the approved loan amount, the interest rate, including the Annual Percentage Rates(APR), and the maximum loan repayment tenure.
5. Key Statement and Facts & Loan Agreement
If you accept the loan offer extended by the lender, the lender then drafts and sends you the official Personal Loan agreement contract. The contract comprises the Key Facts Statement (KFS), in which the lender details all the fees, charges, and applicable terms associated with the Loan. If you find the loan terms agreeable, you can sign the physical/online Personal Loan agreement sent by the lender.
6. Loan Disbursement
Based on your bank account details provided in the loan application and agreement documents, the lender transfers the sanctioned Personal Loan amount directly into your bank account. If you have opted for the loan for specific purchases (e.g., gadgets, appliances, etc.), the lender disburses the amount into the vendor’s account. The whole process takes 4-48 hours, depending on the lender.
7. Post-Disbursal Set-Up
After disbursing the loan amount, the lender sends you a loan confirmation letter, stating that your loan account is officially open. The lender also sends you the loan amortisation schedule. You also need to sign the National Automated Clearing House (NACH) mandate, which serves as your standing instruction consent to your bank to deduct EMIs on a fixed date each month.
Things to Remember
- The loan agreement comprises all the facts concerning fees/charges and other loan terms.
- You must read the loan agreement in detail before signing it to avoid any surprises.
- Instant Personal Loans are processed swiftly, making them the ideal option for emergencies.
- Offline applications take longer to process and can take 2-7 days until the loan is disbursed.
- Your city, area, or location also affects the speed at which your loan is approved/disbursed.
Final Note: As is apparent, lenders conduct several steps and procedures on their end to approve a Personal Loan application. Yet, if you are deemed eligible, you can receive funds into your bank account within 4-48 hours, especially if you apply for Personal Loans online. These attributes make an instant Personal Loan an excellent facility, empowering you to deal with all your financial emergencies head-on, while you also enjoy flexible repayment terms and other incredible benefits.