How does personal loan disbursement work?

You’ve spent hours perfecting your credit profile and are finally taking the plunge to apply for a personal loan. Everything goes smoothly with the digitised and quick process. Now, all you’re waiting for is the loan amount to hit your account. This part is known as the loan disbursement. So, how does it work, and how long should you expect to wait? Will it be quick enough to fund your emergency needs? Continue reading to get all these questions answered.

Approval vs loan disbursement 
 

Loan approval and disbursement are closely linked steps in your application process. What happens in between is known as loan processing. Understanding this helps you learn how disbursement works.

Here’s how your loan request progresses from approval to loan disbursement:

1. Loan approval: Getting confirmation
 

The lenders assess your profile based on your income, credit score, existing debt, and age to check your eligibility. The loan terms you select are also looked into to decide on the monthly applicable EMIs. Once all of it is verified, your loan is finalised. It is approved if you meet all the parameters and declined if you don’t qualify. 

You can ensure you incur no hindrance at this stage by applying thoughtfully. Most lenders, including IDFC FIRST Bank, help you with this through accessible tools like  personal loan eligibility and  EMI calculators.

2. Loan disbursement: The actual transfer
 

Loan disbursement happens if everything goes well at the approval stage. The lender completes the sanction by initiating the disbursement and sending the loan amount directly into your account. The final amount received is post deduction of processing fees, stamp duty charges, GST, and other upfront costs. 

A unique factor of FIRSTmoney personal loan is that the processing fee is charged over and above the loan amount, and not deducted from your loan amount. This way you can get the full amount disbursed to your bank account, that too within 10 minutes. 

However, in case you choose to withdraw the full approved loan amount, the fee will be deducted from the loan amount.

Loan processing steps 
 

Once the loan is approved, your loan request goes into the processing stage. It involves the following steps, which ultimately influence the speed and efficiency of loan disbursements.

1. Document verification
 

Even post approval, some lenders may recheck the documents you’ve submitted to ensure everything matches and is complete. Even minor gaps can pause or impact the speed of disbursement.

2. Final internal checks
 

A last round of system compliance checks from the lender’s side usually doesn’t take much time, but it affects the loan processing time. This is a routine step, especially with physical applications.

3. Agreement and consent
 

Once your loan application is approved, you will receive the loan agreement to review and accept. You can then confirm your acceptance either digitally or in person. Go through the terms like interest rate, tenure, EMI amount, fees, and other clauses carefully before accepting.

In case of digital-first loans like FIRSTmoney, the agreement and consent process is entirely online All loan documents can be accessed via the IDFC FIRST Bank app in loan section. The Key Facts Statement is visible to customer before Video KYC and customer can view the detailed Key Facts Statement if required.

Disbursement timelines 
 

The time taken to disburse the loan differs based on the lenders. Some, like IDFC FIRST Bank, disburse the amount under 10 minutes for the instant FIRSTmoney smart personal loan. Others may take a couple of hours or days. The timeline of loan disbursement depends on various factors, such as meeting the eligibility criteria, providing complete documents, and the lender’s internal policies.

Reasons for the delay in loan disbursement 
 

Loan disbursal can sometimes take longer than the expected timeline due to the following reasons: 

1. ncomplete or mismatched documents
 

In most cases, small inconsistencies in your information can cause issues. Be it income details, spelling errors in the name, or outdated address proof, you want to be sure to avoid reuploads and delays.

2. Pending acceptance of the loan agreement
 

If you take the time to review the loan agreement, the lender cannot move forward with the loan disbursement. So, as much as it is crucial, make it quick to avoid delays in loan processing.

3. Issues with internal compliance checks
 

If there is a system error or heavy load of multiple applications, particularly with offline ones, you may experience some delay with the loan processing and disbursement.

4. Technical or system downtime
 

Digital systems, although efficient, are not always perfect. There are occasional system upgrades and glitches that can slow down the back-end processing.

Cut-off timings
 

Many lenders, when processing your loan request through their physical establishments, follow daily cut-off times. If your loan request is received beyond this window, disbursement may get pushed slightly.

Failed loan disbursement reasons 
 

A failed loan disbursement happens because of a major hindrance in loan processing. It usually signals a corrective action from your end. While it can feel overwhelming, in most cases, a simple fix can help you qualify again:

1. Incorrect details
 

Some detail errors are minor, while others are non-negligible, like hidden information about your income, employment, existing debt, and more. In such cases, lenders may reject your application.

2. Incomplete or wrong documents
 

If the documents are not sufficient to verify your eligibility, it is difficult to proceed with the loan processing. Hence, lenders may stop the loan disbursal and ask you to make corrections.

3. Low credit score
 

Your credit score is an important deciding factor in the kind of loan terms you get and whether you qualify. If it is extremely low, and your income can’t make up for it, lenders may not approve your loan request. 

4. Undisclosed information
 

It’s important to maintain transparency even if some aspects don’t work in your favour while applying for a loan. If there is any scope for false interpretation, it hinders the loan approval and disbursal.

Tracking the status of your loan disbursement 
 

As you wait for the loan amount to get credited to your account, you can track your application through the lender’s website or banking app. This gives you more clarity on what’s happening. Here’s how you can track your loan disbursal status:

1. Log on to dashboards or the mobile app
 

You can log in online and view the real-time status of your loan application based on the reference ID. It will reflect as pending, processing, confirmed, or disbursement initiated.

2. Get SMS alerts on email updates
 

If you don’t want to go through the hassle of manually tracking the status, you don’t have to! Most lenders send you updates via SMS or email.

3. Contact customer care
 

If you notice a longer delay or face issues with tracking, you can reach out to the customer care executives to get clarity. They are at your service 24/7.

Final words 
 

The loan disbursement process is usually fuss-free, especially if you apply online. The key is to meet the eligibility criteria and complete your application with correct and complete details. Don’t leave any room for lenders to reassess. Also, check their policy for disbursement beforehand to know what to expect. You can also seek assistance throughout the process to get your doubts resolved promptly.