Learn Everything About Personal Loan Disbursal Process

The two noteworthy features of a personal loan are quick approval and fast disbursement. No wonder most people turn to this financing option when they need money for urgent needs or an exciting vacation. In addition, if you own a business, a personal loan can assist you in dealing with cash flow issues and in taking advantage of every business opportunity that comes your way.
 
In order to make the most of a personal loan, it is necessary to understand the steps involved in the personal loan disbursement process. But first, let's discuss the factors that influence loan disbursement.
 

Factors Affecting Personal Loan Disbursement

The lender considers multiple factors when determining the personal loan amount. Amongst them, the most common ones are described below. 
 

1. Income

Each lender has a different minimum income requirement. It assists them in determining whether you are capable of covering the EMIs once the disbursement is made. Most lenders typically require a monthly income of Rs 15,000 or higher. However, they also look at how much money you have left after paying off your current debts and covering basic expenses. If the leftover income is sufficient, then only you will be approved for a loan. 
 

2. Credit Report

Your lender needs to understand your credit behaviour before making a personal loan disbursement. And a credit report can help them with this. It includes information about debt repayment patterns, loan settlements (if any), moratoriums, hard inquiries, and previous debt defaults. Poor credit scores reduce your chances of receiving approval for a personal loan.
 

3. Age

Your earning potential is directly proportional to your age. It is typically difficult to manage your monthly debt obligations if you are under the age of 21 or if you are about to retire from your job. As a result, the lender will hesitate in sanctioning a loan to your profile.
 

4. Loan Amount

Although most lenders offer personal loans up to Rs 5 lakhs, the approval limit is determined by your eligibility criteria. If you barely meet the qualifying criteria, the lender will not take on higher credit risk and may not approve you for the maximum loan amount they offer.
 

5. Repayment Tenure

If you have a low income, the repayment period you choose is critical in determining the amount of the disbursement. If your requirements are greater, but your monthly income is between Rs 15,000 and Rs 20,000, you should consider a longer tenure loan. It will significantly reduce your EMI amount while eliminating the possibility of loan default.
 
Now that you have learned about the factors that influence loan disbursement, it’s time to learn about the loan disbursal process.

Also Read: Opting for Instant Personal Loan Know How to Get Better Interest Rate
 

Personal Loan Disbursement Process

Submit Application

In order to avail a personal loan, make an application to your desired financial institution for the same. The application must be properly completed, with your name, address, income, and other relevant information. If you share inaccurate information, your application will be rejected. In addition to the application, you must provide your KYC documents, such as your PAN and Aadhar card, as well as a proof for your income.
 

Document Verification

Following the submission of the required documents, the lender will verify your information digitally or, if necessary, physically. For example, if there is a discrepancy in the addresses provided for the two different documents, the lender will send an executive to the address provided for verification.
 

Credit Appraisal

After reviewing the documents, the lender will move on to the risk profiling process. At this point, the lender will assess your income proof to determine whether it is sufficient to cover the EMI calculated for the loan amount you are seeking. The lender will also request for your credit report from the credit reporting agency. They will use the report to assess your repayment potential based on your credit behaviour. 
 

Loan Offer

Once the lender has determined the loan amount you are eligible for, they will issue you a loan agreement. This agreement will include information about the loan amount, interest rate, processing fees, repayment period, and other vital details. If you accept the offer made to you, you must sign and return the agreement to the lender.
 

Loan Disbursement

After you accept the offer, the lender will transfer the funds directly to your account upon completing a few more formalities. The disbursement may take anywhere from 24 to 48 hours. 
 
Also Read: Who to Contact if You Want to Apply for a Personal Loan in India?
 

What Happens Following the Loan Disbursement?

• Loan Confirmation

  The lender will send the confirmation letter to your registered email address once the funds have been transferred to your account. You will also be given a welcome kit by the lender. This kit will include information on various payment options, an amortization table detailing how much you will pay in interest and the principal outstanding every month, and a few other things.
   

• Loan Repayment

  After the fund disbursement, you must repay the EMI on the due date of each month, as specified in your loan agreement. You can pay your EMI by submitting a post-dated cheque to your lender or by automating your payment through the Electronic Clearing Service (ECS).
   

• Stay Informed

  As a borrower, your personal loan is more than just a disbursement. You should be aware of the benefits of timely repayment as well as the consequences of default, among other things. You must also learn about the pre-closure process and the fees associated with it.

 

How to Cancel a Personal Loan After Disbursement?

You cannot cancel your personal loan once the funds have been deposited into your account. The reason for this is that you are bound by the agreement you signed before the funds are credited to your account. If you want to get rid of the debt burden after disbursement, the only option is to go through the foreclosure process, which is permitted after the first twelve months of successful EMI payments.
 
However, you may cancel your loan after the lender makes you a loan offer based on risk profiling. 
 
Also Read: A Step-by-step Guide to Getting Unsecured Personal Loans
 

To Conclude 

In today’s digital era, personal loan approval is just a matter of a few minutes. But to receive a quick disbursement, you must consider improving your credit history, reviewing the eligibility criteria, and selecting the loan amount and tenure based on your affordability. After disbursement, make sure you pay your EMIs on time and keep track of your loan expenses.