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A Step-By-Step Guide To The Loan Application Process

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Created on
June 2, 2023

Summary

What’s Inside

Remember when your car broke on the way to work, or maybe you had a medical emergency and bore an expected financial burden? Many people face situations like these, and getting a loan from a bank can be a lifesaver. Today, most lenders facilitate easy and hassle-free loan disbursals.

If you've been wondering how to go about applying for a loan, look no further than this step-by-step guide.

What Is a Personal Loan?

A personal loan is the total money you can borrow from different financial bodies like banks, credit unions and online lenders. Once approved, you repay the loan in fixed monthly instalments with interest. Most lenders offer personal loans as unsecured loans. This means you don’t need to pledge any collateral, like property, against the loan amount.

Personal loan interest rates vary from lender to lender and it depends on factors like your credit score, financial history, loan-repayment ability, etc.

Understanding The Process

Personal loans are flexible, and you can use them for nearly any purpose, such as consolidating debt, weddings and financing children’s education.

1. Eligibility status

Before applying, identify why you need the loan and how much you need to fulfil those needs. Check your credit score and see if you qualify for the loan.

2. Interest rates and other charges

Different financial institutes charge different interest rates, which depend on various aspects like creditworthiness, tenure, and loan amount. So, visit the official websites of lenders and compare the rates. Choose the most affordable and reasonable rates. Also, consider checking the processing fee and any other charges the lender asks for.

Here is a detailed guide on loan processing charges and other related fees.

3. Calculate EMI

Most lenders have online EMI calculators. It helps calculate your monthly EMI for the desired loan amount and understand your repayment burden. This EMI calculator is easy to use and free of cost. Check it out now!

4. Document requirements

Check all the necessary documentation required by the lender and gather them. Most lenders require

  • Identity Proof: Passport, PAN Card, Aadhaar Card, etc.
  • Address Proof: Passport, Aadhaar card, Lease/rent agreement, etc.
  • Income Proof: Last three months’ salary slips, Form 16, last six month’s bank statement and income tax return
  • Passport-size photographs

5. Submit the application

Fill out your loan application, online or in person, along with all required documentation. Wait for the lender to evaluate your application and creditworthiness.

6. Accept & sign

Thoroughly review the loan agreement. Sign the loan agreement for acceptance after checking and understanding the terms and conditions. Once you get the final approval, the personal loan process may take up to 72 hours for the amount disbursal.

7. Repay the loan

Repay the loan according to the agreed-upon schedule to avoid default and potential legal action. Many lenders also provide online details of the status of your repayment. Keep track of your EMI to avoid any negative impact on your credit score.

Wrapping Up

In conclusion, applying for a personal loan can be valuable when facing unexpected financial burdens or pursuing important goals. By understanding the process and following a step-by-step guide, individuals can easily navigate the loan application journey. Factors such as eligibility, interest rates, charges, and documentation requirements should be carefully considered to make an informed decision. Once the loan is approved and disbursed, adhering to the repayment schedule and maintaining a good credit score is crucial. With responsible borrowing and timely repayment, personal loans can be a helpful tool in managing one's financial needs.

If you're looking for a personal loan, apps like Fi Money provide instant pre-approved loans at low-interest rates. It has an in-built feature to set up automatic in-app payments to prevent late loan payments. Use it to your advantage and get quick financial assistance.

Frequently Asked Questions

1. What is the first step in the loan process?

The first step involves applying for a personal loan. This step aims to provide the borrower’s information, like the loan amount, purpose, and personal and financial information.

The lender reviews all submitted details to understand their creditworthiness and loan-repaying ability. Most lenders have online or offline facilities to complete the application process.

2. What is the process of the loan cycle?

The loan cycle of most lenders has the following stages for the personal loan process.

  1. Application: Submitting a loan application to the lender
  2. Evaluation: The lender assesses the borrower's eligibility
  3. Approval and Disbursement: If the borrower meets the lender's criteria, the loan is approved, and the funds are disbursed to the borrower's designated account.
  4. Repayment: The borrower is required to repay the loan according to the agreed-upon terms.
  5. Closure: Once the borrower successfully completes the repayment, the loan is considered closed.

During the first two stages, the lender checks the credibility, financial profile, and repayment capacity. After final approval, the lender sanctions the loan amount and transfers it to their bank account.

Once you receive the loan amount, you are liable to repay the loan in full, including interest. The loan cycle ends after repayment of the loan amount in pre-decided tenure.

Disclaimer

Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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