How to apply for a personal loan? A step-by-step guide | Mint

A personal loan is an option you can consider if you want quick funds without guaranteeing a collateral. Personal loans offer you minimum documentation and an easy application process so that you can immediately access funds when you need them. However, you must be aware of the fact that personal loans attract higher interest rates as compared to other loans offered in the market.

The process of applying for a personal loan involves steps which revolve around your income, employment, age, credit score and other criteria set by the bank. Let’s understand the step by step process of applying for a personal loan.

Key advantages of personal loans

Minimum documentation: Personal loans offered by banks and NBFCs with a minimum document submission requirement. These documents are required to verify your identity and other key factors such as your income and employment. This in fact saves time and energy, giving you a stress free experience.

Balance transfer: You can easily transfer the remaining loan balance to a new lender if you already have an existing loan. Along with this, if you have a good credit score, you can also enjoy lower interest rates for your personal loan.

Quick loan disbursement: As soon as you get an approval for your personal loan, the funds are transferred instantly to your source account. This process usually gets completed within a few hours, however, in some cases it may take up to 1-2 business days.

No collateral needed: One of the key features of personal loans is that it does not require collateral and can be availed if you do not have a high value asset. Hence, these loans are granted on the basis of your creditworthiness and your income along with other criteria set by the lenders.

Personal loan online

Loan eligibility:Visit the lender’s website and check for the personal loan eligibility criteria. If you are an existing customer, you may get a pre approved loan. However, if you are not, then it is essential that you keep a note of the eligibility criteria set by the lender.

Application:After you have understood the eligibility criteria, you can then start filling the application form online on the lender’s website. In this you will be required to fill in your essential information such as age, gender, income, employment etc.

Documentation process:Your documents are extremely important for your application process as it helps verify your eligibility for the personal loan. Although the documentation process is quite simple and time efficient, you may be asked to present more documents as per your application.

Select loan terms:Once your documents are verified, you then need to choose your desired loan amount along with the interest rate and repayment tenure.

Submit the application:Once you choose your desired loan amount, you can then submit your application. However, it is advisable to always recheck your application form before submitting as it eliminates the chances of error.

Approval:Once you have submitted your application, it will get approved within no time. However, in some cases this may take a little longer and even a few days.

Loan disbursement:As soon as you get an approval on your loan application, funds will be transferred to your source account instantly by the lender. However, this may sometimes take a few days in some cases.

Personal loan offline

Branch visit: If you wish to apply for a personal loan offline, you need to visit your lender’s nearest branch. You can directly ask the relationship manager about the application process and the personal loan offered by them.

Application form:Post this, you will be required to fill in the personal loan application form. If you face any issue while filling the form, you can approach the next available representative in the branch.

Document submission:According to your lender’s requirement, you will be then asked to submit a few documents which will be analysed to evaluate your eligibility for the personal loan.

Verification:Once you have submitted the documents, the lender will then verify your information and then accordingly approve your loan application.

Approval and disbursement:Once approved the loan amount will be credited in your account.

Note: For latest interest rates, please refer to the bank’s website. 

(Source: Paisabazaar, as of November 2024) 

Conclusion: Is personal loan the best option? 

One of the major advantages of personal loans in India is the fact that you do not require collateral in order to apply for the loan. However, you must realise that these loans are offered by lenders at a much higher interest rate than other loans offered in the market. This is because of the increased risk for the lender for  lending money without a guarantee of high value assets. 

Before you decide on getting a personal loan in India, you must first critically understand your wants and needs to decide whether a personal loan is right for you. Personal loans are offered instantly hence it can lure you to borrow more money than you actually need. 

It is highly important to first plan your finances well and understand the monthly implications of repaying the EMI for the personal loan. With a precise financial analysis and planning you can avoid yourself from falling into debt traps and as a result, make informed decisions.