Personal Loan Lifecycle: Key tips for smooth application, approval, and repayment | Mint

A personal loan can be a great option in helping you take care of immediate monetary needs such as paying for a medical emergency or to finance your dream vacation. However, it’s important to understand how a personal loan works through the life cycle so you can manage it responsibly and avoid financial burdens.

Let us understand the life cycle of a personal loan in detail, from application, approval, disbursement to repayment, so that you can make a better informed decision and successfully repay the loan on time.

Understanding the lifecycle of a personal loan

Step 1: Pre-application stage

This is the planning phase where you look at your finances and explore the loan options you can choose from.

Step 2: Application stage

After researching, you then apply for the loan with the lender you’ve decided on:

1. Gathering documents

Commonly required documents include:

• Aadhaar Card, PAN Card for identity proof
• Address proof
• Salary slips or bank statements (proof of income)
• Employment details

2. Submitting the application

• You can either complete the application process online or you can visit the nearest branch and complete the process in person.
• Make sure all details are correct in order to avoid delays or rejections.

3. Processing fees

• Non refundable processing fees are charged by most lenders.

Step 3: Loan approval and disbursement

Your application is then evaluated for approval and disbursal:

1. Loan approval

• The lender will review your credit score, income stability and repayment history to determine your creditworthiness.
• Post this, the loan is either approved or rejected.

2. Disbursement

• The transferred amount is then directed to your bank account after the loan amount is approved.
• For pre approved loans, the loan amount is disbursed much faster.

Step 4: Repayment stage

This is the most important phase of the loan cycle. It involved your loan repayment journey through EMIs (Equated Monthly Installments) at an interest rate agreed upon by the lender.

Step 5: Loan closure

The final stage is where you have met all your repayment responsibilities and are actually closing the loan.

In conclusion, personal loans can be a great option for you if you want to meet your financial obligations as well as improve your credit score gradually. Personal loans attract higher interest rates in general, hence, before you decide on choosing one, explore your needs so that you can get the best option which suits your budget and requirements.

(Note: Raising a loan comes with its own risks. So, due caution is advised)