What is Loan Disbursement: Meaning, Process, and Steps

The personal loan disbursal in India has doubled in recent years, whereas the value of loans increased from ₹5,907 crore to ₹40,845 crore. It's just not the Personal Loan market that has increased; the Personal Loan disbursement process has also gotten better, simpler and faster. The process ensures that you, as a borrower, get access to funds as quickly and conveniently as possible. The speed at which the loan is disbursed is one of the many reasons why personal loans are popular. 

In this blog, we will explore the entire process from application to funds credited into your account.

What is Personal Loan Disbursement?

The Personal Loan disbursement refers to the process where a lender credits the sanctioned amount into the borrower's account after the loan approval. It involves releasing the approved loan amount and crediting it to the borrower's account. It's the last phase of the loan application and approval process.

Personal Loan Disbursal Process Explained

Personal Loan offers one of the easiest and most accessible ways of getting funds. It offers you complete flexibility to use for everything from medical bills to house renovation. If you know all the steps involved in the loan disbursement process, you can complete all the formalities on time and get the loan quickly.

Step 1: Application and Approval: Where Your Loan Journey Begins

The first step toward loan disbursement is submitting a loan application. The process starts when you apply for a Personal Loan, either online or at a physical location. Here is how you can initiate the Personal Loan application process:

●    Provide your personal, financial, employment, and loan-specific information.
●    Upload documents such as ID, income, and address proof.

You'll receive confirmation of your eligibility from the lender after the lender reviews your application. In comparison, traditional banks may take 2-5 days for approval, depending on the volume of documents and the speed of verification procedures.

Accuracy is important in the loan application. Even minor errors, like a misspelt name or incorrect date of birth, can cause delays in your loan disbursement. It could even lead to loan rejection.
 

Step 2: Document Submission

After your loan application is submitted, the next step is to provide relevant documents. These documents are important for verifying your identity and address:

While traditional lenders like banks may still ask you to submit these documents, most lenders nowadays follow a completely digital process. You can scan your documents and upload them online or fetch them from DigiLocker for faster application, approval, and disbursement.

ID proof	Income proof	Income Tax Return (ITR)
Address proof	Bank details	Two passport size photographs

Step 3: Primary Eligibility Check

The bank or NBFCs perform an instant eligibility check to eliminate applicants who do not match fundamental requirements. Here are all the factors that a lender considers to confirm your eligibility:

●    Age, usually between 21 and 65 years
●    Must be an Indian citizen
●    Employment type (salaried or self-employed)
●    Work experience
●    Income
●    Credit score

Also Read: How to Increase Your Personal Loan Eligibility Without a Salary Hike

4: Risk Assessment & Credit Appraisal

After a quick eligibility check, usually banks and NBFCs conduct a deep analysis of your loan application to gauge financial risk and credit in detail. The optimal Debt-to-Income (DTI) ratio must be less than 30% for seamless loan repayment. The upper limit shouldn't go above 40% of your net income, as beyond this could indicate a risk.

The same parameters are followed by several other banks and NBFCs, who view a DTI of 35–40% as acceptable, with anything lower being more advantageous.

Step 5: Loan Offer Generation

If you qualify for a Personal Loan, banks or lenders will promptly issue a customised loan offer, often within minutes. The offer will include the sanctioned loan amount, affordable interest rate, payback terms, and processing fee.

The offer also specifies crucial aspects such as prepayment choices, late payment fees, and relevant GST, allowing you to make an informed decision. It is important to carefully examine the offer, the overall cost of borrowing, and select terms suitable for your repayment ability. This will lead to seamless loan disbursement.

Also Read: What are the Benefits of a Pre-Approved Personal Loan?

Step 6: Agreement and E-KYC

You must complete e-KYC with the help of Aadhaar OTP authentication to proceed with the loan application. Once the KYC is done, you can review the loan terms and conditions to accept it digitally. This agreement usually includes repayment terms, any charges for late payments, and prepayment or foreclosure conditions.

Step 7: Final Approval and Loan Disbursement

Once all checks are completed and the documentation is in place, your application will move to the final stage: approval and loan disbursement.

●    Loan Drawdown Request: Once your application has been granted, you must submit a request to avail the loan.
●    Funds Transfer: Following your withdrawal request and approval, the loan disbursement takes place directly to the bank account you have provided. 

Sometimes, the loan amount is disbursed but not credited. In that case, quickly verify your bank details with the lender and ensure all your documents are signed. This may help prevent delays and ensure a timely loan disbursement.

Factors that Influence Personal Loan Disbursement

The speed and efficiency of the Personal Loan disbursement are based on these factors involving the borrower and lenders:

●    Credit Score and History: A low score can lead to further delay or even rejection, which can cause delays in disbursement. This is why your credit score must be at least 750 or above.
●    Stability of income and type of employment: Regular monthly earnings, either through salary or business, assure lenders of your ability to repay. Stable jobs in well-established organisations lead to faster loan disbursement.
●    Current Debt Liabilities: A large debt-to-income (DTI) ratio is an indication of over-leverage. In case the borrower is already paying off several loans or credit cards, lenders will take more time to assess risks.
●    Amount and Tenure Requested: Large loan amounts will involve more thorough evaluation, such as employer checks and income documentation. This will slow the process.
●    Precision in the Documentation: The most common causes of delays are missing or wrong KYC information, income documents, or bank statements. By submitting correct and complete documents, the verification process will be easier.
●    Application Mode: Digital lenders and banks that use digital verification systems can approve loans in 24-48 hours, whereas the offline application process can take longer since it needs manual verification.

To Conclude

A speedy Personal Loan disbursement can mean the difference between meeting the financial objective and missing it completely. This is why understanding the Personal Loan disbursal process is important. It helps you improve your chances of getting funds urgently in crucial situations.
This is why at Poonawalla Fincorp, we have designed our loan application process to be simple and disbursal faster. Apply for a Personal Loan of up to ₹50 lakh with quick disbursal. The speed at which the loan amount is credited into your account allows you to meet all your financial objectives.

FAQs

How much time does it take for a Personal Loan application?
The processing time for a Personal Loan application can vary from a few minutes to 3-4 days. This normally depends on the lender, your credit history, and the list of documents that you are submitting. Digital lenders usually process applications more quickly than traditional banks.

What should I do when the loan amount is disbursed but not credited?
Get in touch with the bank to find out if your account has received any transactions. If the bank hasn't, contact your lender to inquire about the status of the transaction and the anticipated processing time.

What is the role of KYC verification in a Personal Loan disbursed?
KYC (Know Your Customer) verification helps to check the authenticity of your identity and address. It’s compulsory to do KYC while applying for a loan. It speeds up your loan approval process.

Can personal loans be disbursed on weekends or bank holidays?
Disbursements usually occur on business days and hours. However, some digital lenders and banks that use real-time payment systems may conduct disbursements on weekends.

Can I change the disbursement account after my loan is approved?
Yes, however, you need to provide a request in writing and verification of the new account. This may cause a delay in disbursement because the lender has to verify the new information.

What can be the reason for a sanctioned loan getting delayed in disbursement?
Most often, it is due to missing documents, delayed KYC verification, system failure at the bank, or audits of compliance performed before the final transfer.