How to Take a Loan from the Bank? Requirements & Process

Taking a loan from the bank can be a crucial step in achieving your financial goals, whether it's buying a new home, starting a business, or managing unforeseen expenses. Understanding the requirements and the process involved is essential to ensure a smooth and successful application. In this blog, we'll guide you through the key prerequisites you need to meet and a step-by-step overview of the application process.

Understanding Your Loan Needs

Before you begin the process of taking out a loan from the bank, it is important to understand what your loan needs are. But why is it important, and what factors should you consider when choosing a loan?

• Importance of Identifying the Right Type of Loan

  Choosing the appropriate loan type is essential to securing favourable terms for your loan in India. Each loan category offers features such as interest rates, repayment durations, and processing charges. Opting for a loan tailored to your specific requirements ensures you receive the most suitable financial package.

  For instance, if your goal is to refurbish your home, a home improvement loan with an extended repayment period could be optimal. A personal loan with its faster approval process might be more suitable for urgent medical expenses. By familiarising yourself with the various loan options and selecting the one that best suits your needs, you can optimise savings and streamline the repayment journey.

• Factors to Consider When Choosing a Loan

  There are several factors to consider when choosing a loan, which will determine your financial health and the loan procedure. Depending on the financial institutions, there are different loan criteria, such as age limit, income needs, employment status, and more. These are the eligibility parameters you need to consider when preparing for your loan procedure. Below are some of the factors to consider when choosing a loan:

  1. Loan Amount

     While you might be eligible for a higher loan amount, it's wise to borrow only what you truly need. This disciplined strategy helps you avoid excessive debt and ensures you don't pay interest on unnecessary funds. Therefore, before taking out a loan, assess the purpose of the loan and borrow an amount that matches your actual requirements.

  2. Interest Rate

     Having a high credit score places you in a strong position to negotiate the terms of your loan, particularly the interest rate. Securing a lower interest rate can significantly reduce your overall borrowing costs and alleviate your financial strain. It's advisable to compare various offers and leverage your credit standing as a bargaining tool to obtain the most favourable loan terms.

  3. Loan Tenure

     Is the loan tenure you have chosen fitting conveniently with the rest of your expenses and not being a burden to you? It is necessary to have a repayment strategy with a loan repayment tenure that suits your needs and fits your budget bill, as you don’t want the loan to burden you.

  4. Processing Fees

     In addition to the principal amount and interest, loans frequently come with extra expenses. These can include processing fees, penalties for late payments, and costs associated with loan prepayments or foreclosures. Occasionally, there are charges for documentation and authentication. Knowing these fees beforehand helps in better financial planning and prevents surprises during the loan repayment period.

  5. Foreclosure Policies

     Understanding the terms and conditions of foreclosure can be beneficial. Foreclosure involves fully repaying a loan before the end of its scheduled term. Lenders may allow this after a certain period but may charge a fee for early repayment, especially with fixed-interest rate loans. For loans with floating interest rates, no foreclosure charges are typically applied.

Loan Eligibility and Document Requirements

To be eligible for a loan, you need to meet some basic criteria. Depending on the financial institutions and banks, there are different loan eligibility criteria; however, most banks and financial institutions have some common eligibility parameters. These basic parameters that every bank looks at include:

• Eligibility Criteria

  • CIBIL Score: Above 685
  • Nationality: Indian
  • Employment Status: Employed in an MNC, public, or private sector
  • Age: Between 21 to 80 – depends on different financial institutions
  • Monthly Salary: Above ₹25,000

• Required Documents

  After the eligibility criteria, what matters are documents to take out a loan. Below are some of the most common documents required; some of the documents may vary depending on the bank, but mostly, these are the most common documents required:

  • PAN Card
  • KYC Documents (ID proof, address proof)
  • Property Documents (this is required for home loans)
  • Income Proof (ITRs, salary slip)

Loan Application Process – Online and Offline

Once you have figured out what type of loan you need based on its features and eligibility requirements, you are ready to begin with the loan application process. There are two ways in which you can take a loan – online and offline. We will discuss both ways.

• Online Loan Process

  If you have a bank account with net banking facilities, you are up for a treat. You can now also apply for loans online. If you have decided what type of loan you want to take, you simply need to visit the website of your bank and start applying for it. Here is a step-by-step process:

  • Go to the bank or financial lender’s website.
  • Navigate the types of loans available and click on the desired type of loan you want.
  • Press the 'apply now' button.
  • Fill out the loan application form with the necessary details and submit it to the bank.
  • The bank will review your eligibility and request the required KYC and income documents.
  • If you qualify, the bank will transfer the loan amount to the account specified in the application form.

• Offline Loan Process

  While the online loan application process is simple and convenient, some people prefer applying for a loan traditionally. For example, they can go to their bank branch and physically get their loan application process started. Below is a step-by-step guide on how you can apply for a loan in the traditional way:

  • Visit the bank or financial lender’s branch.
  • Obtain the application form for the desired type of loan and fill in all the necessary details.
  • Provide the required documents to verify your income, age, address, and identity.
  • The lender will review your documents and assess your eligibility.
  • If you are eligible, the loan amount will be deposited into your bank account.

Simplify Your Loan Process with Freo!

Applying for a loan takes a lot of consideration. You need to set a budget that works for you so that you can repay the loan conveniently without it being a financial burden on top of your expenses. Assess your needs, consider important factors, pick the types of loan you need according to your requirements, and then begin the process of applying for your desired loan type.

If you are ready to take a loan and are inclined towards taking a personal loan for your needs, Freo can help you begin the process. With Freo’s simple loan process, you can get a personal loan up to ₹5 lakh without any hassles!

FAQs:

1. How do I check the status of my loan?

   After submitting your loan application, you can track its status by visiting the lender's website. Once the loan is approved, the funds will be transferred to your bank account within a few hours.

2. How long does it take for a personal loan application to get approved?

   The time required to secure a personal loan can vary significantly, ranging from just a few hours to several weeks. This duration depends on factors such as the lender's processing efficiency and how well-prepared the applicant is.