Disbursement Of Personal Loans – What You Need To Know
A Personal Loan is the first financing choice for salaried employees. But it is helpful to those with few assets to use as collaterals. Are you thinking of availing of a personal loan? Learn the complete Loan Disbursement Procedure.
Here, we discuss the complete personal loan Disbursement Process. It also talks about what you can expect. So, whether you’re in the market for a small or long-term loan, this article will guide you through all!
What is a Personal Loan?
An individual can take a Personal Loan for business or non-business purposes. These are typically unsecured. It means they are not backed by collaterals like a house or a car. Personal loans are also usually instalment loans. You need to repay it monthly over the loan tenure.
With a Personal Loan, you can borrow a fixed amount for any purpose. With the repayment option, you can repay the loan amount over time. This is set during loan issuance. This can be as low as six months and as high as 60 months. The period depends on the amount you have borrowed.
The interest rates for personal loans are usually lower than credit interest. Hence, these are sought after by people who are budgeting their purchasing goals.
What does Loan Disbursement mean?
Loan Disbursement is the release of funds from a lender to the borrower. The borrower typically receives the funds in a lump sum, and the loan is said to be “disbursed”. Loans are usually disbursed once the loan agreement has been signed and the borrower has submitted all the required documents.
In some cases, the funds may be disbursed before the loan agreement is signed; this is known as ‘Pre-Disbursement’. Once the loan is disbursed, the borrower is required to make repayments or pay EMIs every following month.
The borrower must pay monthly EMIs. It’s repayments for the principal amount plus the interest to the lender. If the borrower fails to make a payment on time, he might face penalties. In most countries, loan agreements can be cancelled. Sometimes, the borrower must pay an amount (previously agreed) to compensate the lender for cancelling the loan agreement.
Let us now get to the complete process that involves Loan Disbursement.
Personal Loan Disbursement Confirmation
After the Personal Loan has been disbursed, the bank will send a confirmation letter to the borrower via email or paper copy. The bank will also provide a calendar showing when your payments are due and a table that helps you calculate the principal-to-interest ratio.
Mode of Personal Disbursement Loan
Once done with the application process, your Loan Disbursement Process usually starts within 24 hours or might take up to a week.
Once a bank approves your application, it provides you with a cheque to collect from the branch. You can then take it to your financial institution and deposit it into your account.
The loan amount can sometimes be credited to your bank account by the concerned bank in an NEFT transfer.
Factors on which the Amount of Personal Loan Disbursement depends
Different factors affect the amount of personal loan that gets disbursed, depending on their eligibility. These include income level, location, and other individual preferences.
Generally speaking, the more financial assistance you need help with, the higher your monthly payment will be.
However, there are a few exceptions to this rule – anyone with good credit scores will likely get lower rates than those with less-favourable ratings. And people in rural areas may receive better terms than those living in major metropolitan areas because lenders can often find borrowers there more easily.
There are also several different types of loans available for personal use – direct lending from banks and other financial institutions (i.e., commercial loans), peer-to-peer loans (which can also involve online platforms), refinancing existing debt (including mortgages and car loans), and reverse mortgage borrowing/lending where home equity is tapped as collateral for a loan against it.
Personal Loan Repayment Procedure
Once you have received the money, you will be able to repay the loan you took out from your bank by the terms of your agreement with them. You can repay the loan either through post-dated cheques or ECS.
The option to set up an auto-debit with standing instructions makes the repayment process easier for borrowers. This option allows borrowers to have their repayments automatically deducted from their bank account, reducing the need to remember to make regular payments. The process can be set up so that the total amount paid back each month is predetermined, meaning there is less chance of running out of money if a large sum needs to be repaid quickly.
Opting for a Personal Loan is not always a bad choice. Even for a rookie, it takes some time to learn the tidbits of managing their finance. If you’re looking to budget your big dreams and make that massive purchase for your future, a Personal Loan might be a good option.
However, before taking that big leap, it is important to thoroughly learn the Loan Disbursement process thoroughly. Any doubts should be addressed before the process begins.
Finally, remember the most important thing before applying for a loan – don’t forget about your financial goals! Also, keep an eye out for eligible offers. After all, debt can ruin lives but also pave the way to new opportunities if managed wisely!
Get in touch with the best personal financing provider in India. Piramal Financing provides up to 10 Lakhs of Personal Loans to eligible applicants to help you achieve your dream wishlist!
Also Read: What is the Debt-to-Income Ratio?
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