What happens after personal loan disbursal?

Wed Oct 17, 2012 10:13pm IST

A grocery shop owner counts rupees notes in Ahmedabad May 23, 2012. REUTERS/Amit Dave/Files

A grocery shop owner counts rupees notes in Ahmedabad May 23, 2012.

Credit: Reuters/Amit Dave/Files

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Personal loans are being availed today by thousands of earning professionals to meet various requirements in their lives. The ease and simplicity associated with the personal loan along with no restrictions on the end usage makes it extremely popular option to raise funds when there is an urgent need. There are many doubts in the minds of applicants regarding the post disbursal procedure involved in a personal loan.

Receiving the Money: usually the banks provide a demand draft or a banker's cheque which is either couriered to the applicant or has to be collected physically from the branch. In some cases the transfer is made through NEFT to the borrower's nominated account.

Amount Disbursed: the actual amount of money that is disbursed depends on the loan applied for and approved, deductions of processing fees, service tax and any upfront installment as agreed upon in the loan agreement. In case it is a top up personal loan the amount that is disbursed is over and above that was calculated for the existing loan.

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Confirmation by Bank: After disbursing the loan the banks usually provide a welcome kit along with the confirmation mail. This kit contains various documents such as copies of the loan agreement, schedule of repayment stating the EMIs and the amortization table and the rate of interest, tenure and total amount disbursed.

Commencing repayment: The repayment is made through post dated cheques or by ECS as determined by the bank and the borrower. In case the borrower has an account in the same bank then standing instruction for periodic auto debit may also be given for ease of transactions. Only the salary account of the borrower in other banks is acceptable for EMI deduction and not any other account. In case the loan is disbursed before 20th of the month then the EMI payment commences from the nest month but in case of the disbursement taking place after the 20th of a month the first EMI is usually due on the month after the next month.

Change of Account: While the bankers need not be informed of any changes in the job of the borrower, any change in the salary account from which the EMIs are being paid must be notified immediately. The cheques deposited or the ECS option will then have to be swapped in order to maintain continuity of repayments without default. However the borrower may choose to continue with the old account if he can keep it sufficiently funded at all times.

Insufficient Funds: In case any of the ECS commitment or cheque bounces then the lending institution shall a penalty to the borrower.

Loan transfer: It is possible to transfer a personal loan from one bank to another but some amount of prepayment penalty will have to be borne by the borrower in such cases.

The borrower must know the exact sequence of events that will take place after the approval and disbursement of the personal loan and the payment modalities thereafter in order to avoid defaulting on repayments.

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