We all need funds for large outlay at some point of time. You surely do not have the cash available to purchase an apartment outright so you will depend on the bank to give you funding. Before you approach the bank for funding, it is essential to know the process to apply for a loan the documents required and the preparatory steps from your side. Let us review how to apply for bank loan and get it sanctioned. Understand the differences between a sanction letter and a disbursal letter. What is the procedure to apply for bank loan?
Begin by checking your CIBIL score
If you already have a credit history, you will have a CIBIL score. You can check the CIBIL score by paying a nominal sum of Rs.500 as fee. You can also download this free of cost in certain aggregator website. The CIBIL score ranges between 300 and 900 with 750 being the cut-off. Any score below 750 makes it hard for you to get loan approvals. The reason you need to download your credit report is that it will show you where you stand when it comes to bargaining with the banks to get the best rates and the best leverage. Once you have done your homework on your CIBIL score, you can start the process of applying for the loan.
Process for loan application
There are different ways to put in a loan application with a bank. Let us look at some of the key methods of apply for a loan with a bank:
Online applications can be done easily if you have an account with the bank from which you intend to take the loan. Even if you don’t have a net banking account with the bank, you can apply online through the bank’s website. The bank will give you some basic KYC forms to fill to check your eligibility and proceed to filling up the application form online. You can also upload scanned copies of basic income and statutory documents to begin the preliminary processing of the loan.
In case you are not comfortable with the online mode, then you can also apply for a loan by writing an email to the stipulated id or via phone banking requests. The bank, in turn, will review your eligibility and the bank representative will contact you for further process. You can also apply for loan via ATM kiosks and once you raise a request the bank personnel will contact you and take it forward.
Finally, you can also place an Offline request at the branch stating your request for a loan with your relationship manager. If you already have an account with the bank from where you want to take the loan, the processing would be faster. Select customers can also get instant loan approvals. Click here to know why your financial plan should begin with loan management.
Loan processing and sanction letter by the bank
The process of sanctioning of a personal loan is simpler than property loans such as home loan and car loan. That is because personal loan is unsecured and purely based on your credentials as stated by your CIBIL score. On the other hand, in case of property loans, the bank has to verify not just your financial information, but also the credibility and eligibility of the builder, titles of the property, encumbrance certificate, personally inspect the asset that you are purchasing with the loan amount etc. In case of loan against assets like shares, property etc, the bankers needs adequate proof of ownership and absence of lien.
The bank will check the information provided by you against the data available with them, such as bank balance, salary deposits made into your account, EMIs being deducted from your account, etc. The bank will cross-check and confirm your identity and address details through your Know Your Customer (KYC) documents. Banks may visit you at home to confirm your place of residence and check with your office on your employment tenure.
The copy of your Income Tax Return or salary payslips will help the bank gauge your repayment capacity. This will help determine how much loan amount the bank is willing to sanction to you. After the process, the sanction letter is given to you.
Disbursal of loan to your account
Once the sanction letter is given to you it states the willingness of the bank to fund up to a certain amount and subject to certain terms and conditions. You will now be asked to make out a cheque for the processing fee separately and also give post dated cheques as security as well as sign the ECS agreement for automatic debits for the EMI. Once this is done, your loan is disbursed directly into your bank account or through demand draft. In case of home loans, the cheque is directly paid to the builder. The EMIs will begin after 1 month from the date of disbursal of the loan.