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From applying for a Personal Loan to disbursement, the process can appear complicated at first. But thanks to the internet, everything is now much faster and more efficient. Before delving into the various stages and techniques, it is critical to understand what ‘Personal Loan disbursement’ means. 

Disbursement is transferring the loan amount by the financial institution to your account post approval of your Personal Loan.

If you intend to take out a Personal Loan, you should be as knowledgeable as possible about the Personal Loan process, from application to approval and disbursement to repayment. 

It would also help if you learned as much as possible about the Personal Loan disbursement process. So, how does the Personal Loan pay-out procedure work? What Personal Loan disbursement period would the lender take to disburse your loan? Let’s walk through the application and distribution process to better understand Personal Loans.

Obtaining a Personal Loan

The loan application is the initial stage in the loan disbursement procedure. After you have decided on a lender, you will need to apply for a Personal Loan. Along with a properly completed loan application form, you must send the following documents:   

• Identification
• Address verification
• Proof of income
• Account statements
• Returns on Income (ITR)
• Two passport-sized photographs

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Loan acceptance

The financial institution will begin the approval procedure once you have submitted the loan application with all relevant documents. Depending on your lender, approval can take up to 2-3 business days. The approval process may take longer if your documents are not in order. So, before completing your loan application, double-check the documentation needed for the loan.

Loan approval is usually faster if you are your lender’s existing customer. For example, you can consider the same bank where you have your savings or salary account for your Personal Loan.

Loan disbursement

If your loan gets authorised, the lender will send you a sanction letter by email or regular mail. Apart from stating that your loan application is approved, the sanction letter features additional information, such as interest rate, loan amount, Equated Monthly Instalment (EMI), and so on.

Personal Loans usually get disbursed within 1-2 working days of approval. The borrower can collect the loan amount from the office of the lender. Some lenders will also mail the cheque to you. Meanwhile, most lenders have started transferring loan proceeds straight into the borrower’s bank account as part of online Personal Loan applications.

What happens once the loan is disbursed? 

Loan acceptance: When the loan is disbursed, the lender will send you a confirmation letter via email or regular mail. In most cases, the confirmation letter comes with a Welcome Kit, which includes thorough information on your loan, EMI, amortization table, EMI payment alternatives, due date, customer assistance, and other topics. 

Repayment of a loan: After receiving the loan amount, you can repay it following the loan arrangement. You can pay the EMIs through post-dated cheques or Electronic Clearing Service (ECS).

If you already have an account with the bank from which you obtained the loan, you can set up a monthly standing instruction for automatic EMI deduction. You must pay your monthly EMIs on time, as non-payment or late payments may result in fines and negatively impact your credit score.  

Being a well-informed borrower: You should gain complete information about the Personal Loan procedures before applying. This will enable you to make an informed decision. Do not simply accept the lender’s charges and terms. Understand them thoroughly and, if possible, try to negotiate a lower interest rate. To avoid errors, thoroughly review the loan paperwork, particularly the interest rate, penalty, and repayment choices.

Points to consider in the Personal Loan disbursement process:

• The Personal Loan interest rate is determined by your monthly income, credit score, and loan repayment term. 
• You can transfer your loan from one lender to another at any moment. However, if you switch lenders, you may have to pay the penalty.
• Personal Loan disbursement relies heavily on technology.

As evident, loan disbursement is simple, but each step is critical. Though the process is not time-consuming, picking a lender like Kotak Bank will assure efficient allocation.

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