Personal Loan Disbursement: Step by Step Process
Demand for a personal loan has been rising sharply for a couple of years. From wedding expenses, medical expenses, big-ticket purchase, home renovation and debt consolidation, a personal loan is a feasible option for financing these unplanned and urgent expenses.
The personal loan disbursement process
As a personal loan is an unsecured loan, i.e. borrowers needn’t submit any collateral to get the loan, the disbursement process is very short and simple. The personal loan process can be divided into three main steps: Application, Sanction and Disbursement.
Personal loan application
Borrowers can apply for a personal loan online or by visiting the nearest branch of a lender. Once you submit the duly filled personal loan application form along with required documents, the lender will evaluate the loan application within minutes or hours. The lender checks your personal and financial information including your residential address, phone number, employment type, income flow and credit history. For pre-approved applicants, it takes only a few seconds to approve the personal loan.
Sanction of personal loan
If the lender is convinced about your credentials, and the documents you have submitted are correct and genuine, the lender sanctions your loan. Once the loan is sanctioned, the lender sends you a sanction letter containing details about your personal loan such as the loan amount, interest rate, loan tenure, terms and conditions of the personal loan etc.
Disbursement of personal loan
Once your loan is approved, the lender disburses the loan within 24 hours. The lender issues a cheque or demand draft, which is either couriered or you can collect it from the bank branch. In some cases, the loan amount can be credited into your bank account through NEFT. The disbursed amount can be lower than the amount you have requested. The loan amount disbursed will be based on the following factors:
- Loan type
- Service tax
- Processing fees
- Upfront payments (where applicable)
Confirmation from the lender
After disbursal of the loan amount, the lender sends confirmation email or hard copy at your correspondence address along with a welcome kit. The kit contains an EMI calendar, loan summary and repayment schedule and other most pertinent details of your personal loan. The amortization table helps you understand the repayment schedule including monthly payment paid towards the principal as well as interest.
If you have an existing relationship with lenders as a loan borrower or account holder (savings or current) and you are on the list of pre-approved customers, certain lenders offer instant personal loan offers, which require no document submission and verification.
Loan repayment process
Once the loan amount is credited into your account, you can start repaying the loan as per the terms and conditions agreed upon. You can repay the loan in several ways such as through Post-dated Cheque (PDC), Electronic Clearing Services (ECS) and NACH (National Automated Clearing House).
If you get the loan from a bank where you have an account, you can give mandate/ standing instruction (SI) to your bank to debit your savings/ salary account on a fixed date at a regular interval as agreed by you. However, if you’ve availed the loan from another bank, the bank will accept the repayment through other modes of payment.If there is any change in your salary account, you must inform the lender about the same. It will allow the lender to update the EMI payment source.
If you make the regular payment on your personal loan, your credit score will improve.
Q. How much time will it take for money to be credited after a personal loan is disbursed?
Ans. While it slightly varies from lender to lender, in most cases, you may receive the money within 24 hours through either cheque/ demand draft, or electronically credited into your savings account.
Q. How am I informed about the disbursal of the personal loan?
Ans. After the disbursement of the personal loan by a lender, you will receive an SMS and email confirming your loan has been disbursed. You will also be sent a welcome kit at your address.
Q. Can I transfer my personal loan from the current lender to a new lender?
Ans. Yes, you can transfer the outstanding principal from existing lender to a new lender. However, if the current lender charges a penalty on prepayment or foreclosure of a personal loan, you will need to pay the prepayment charges at the time of balance transfer, as per the policies of the current lender.