Step by Step Process to Apply for Your First Personal Loan

With the advent of technology and ever-increasing competition in the banking and lending sector, Personal Loans are readily available in the marketplace. More so, you can get your loan processed within 12 to 72 hours of filing your application.

However, a bank loan is a financial responsibility and requires your due diligence on every step of the way, right from loan application to servicing the repayment. Thus, we have compiled a step-by-step process that you must follow before applying for your first Personal Loan.

Step 1: Decide the Required Loan Amount

Take a close look at the expense you wish to cover with the Personal Loan amount. Arrive at a reasonable amount that you would need to borrow from the bank or your chosen lender. Here, you should be careful that the amount is not excessively high. For, the repayment of the same may be too taxing. At the same time, it should not be too low, or you may not be able to fulfil your financial needs. There must be a balance between your income and aspirations before deciding on the loan amount.

Step 2: Research the Type of Loan

Many people are unaware of the fact that there are various types of Personal Loans one can choose from. These include:

• Secured Personal Loans, wherein the loan amount is offered in exchange of collateral. These are ideal for those applicants who have no credit history or low credit score or lack a stable stream of monthly income.
• Unsecured Personal Loans, wherein one can obtain the loan amount without pledging any collateral.
• Medical Loans, designed especially for helping the borrower meet medical emergencies.

In addition, there are other loan types such as Travel Loans, Debt Consolidation Loans, , Education Loans, Home Improvement Loans and Business Loans amongst others. While you’re under no obligation to state the final use of the funds procured from a Personal Loan, but sharing the reason upfront may help you get a customised loan from the lender with added benefits. Hence, you should take into consideration these loan types before taking the next steps.

Step 3 – Check your eligibility

When you apply for Personal Loan, the lender takes into account your age, your current occupation, your income as well as your credit history. Make sure to check the eligibility criteria of your chosen lender, and if you fulfil them all, only then file your application.

Step 4 – Shop around

In order to get the best deal on personal loan interest rates, and other aspects of the loan, it is highly recommended that you take a look at the various Personal Loan offers provided by different banks. Once you analyse all the offers and look for the advantages and limitations of each one, you should make an informed decision as to which lender you wish to go with.

Step 5 – Check your Credit Score

In most cases, lenders consider the Credit Score of the borrower before approving their loan application. A Credit Score of 750+ is considered excellent, while that between 600 and 750 is considered fair. A vast majority of lenders do not approve the loan applications of candidates with a score below 600, in a bid to reduce their risk proposition.

Rather than getting turned down for your loan requirement due to a low credit score, make sure you order a copy of your Credit Report before filing your application.

Step 6 – Apply for Personal Loan

Once you have decided on the loan amount, and loan type, and finalised your lender, it is now time for you to fill out the loan application, either online or in person by visiting the bank. If you’re wondering how to apply online, fill out the online application form for Personal Loans, and upload the required documents.

Regardless of whether you apply online or offline, you would be required to upload/ submit the requisite documents, including identity proof, proof of income, and proof of residence, amongst others. Once all your documents are submitted, the bank will start processing your loan application.

Step 7 – Verification Process

If you are not an existing customer of the lending institution, the lender will verify all your documents. If all the details mentioned in the application form are found correct, and the documents are authentic, the lender will process the application.

If not, the bank may ask for additional documents and may even turn down the application altogether.

Step 8 – Signing the Loan Agreement

If your loan application is approved the bank will inform you regarding the same, at which point, you will be asked to sign the loan agreement. The agreement will comprise of all the details of the loan. As a precautionary measure, you should make it a point to read through the agreement before signing it.

Step 9 – Loan Disbursal

When all the formalities are complete, the bank will disburse the loan amount after due deductions i.e., Processing Fee and GST. Depending on the bank’s policies and your preference, the loan will either be offered in the form of a Demand Draft or will be electronically transferred into your account. 

Knowing these steps, you are ready to avail yourself of your first loan. However, never forget to plan about the repayment of the loan amount prior to applying for a loan. It is indeed important to ensure that every EMI is paid on time, without fail. Repaying your small loans and credit card bills on time is one of the fastest ways to improve your credit health.