In the digital era of today, applying for an
online loan no longer requires visiting a bank branch and filling out lengthy
paperwork. Growing internet access and financial digitisation have made online
personal loans a preferred mode to handle financial emergencies. The
application is simplified, swift, and can be carried out virtually from any
place. However, you need to know how these loans work to be able to make
informed decisions. This article will take you through the complete application
process and can help you understand what to expect when taking up a personal
loan online.
What is an Online Personal Loan?
An online personal loan is a type of unsecured
loan that can be applied for and processed digitally. These loans may not
require collateral and can be utilised for meeting short-term financial needs,
such as medical bills, education, home maintenance, or vacations. The personal
loans online application process enables individuals to conveniently
upload the required documents. Furthermore, applicants can get the loan
approved directly from the lender's website or mobile application.
How Do Online Personal Loans Work?
Let us go through the common step-by-step
process of how personal loans are handled online.
Step 1. The Application
Process
The procedure begins with the borrower filling
out an online application form. This form may be available on a lender's
website or mobile app. This application collects basic personal and financial
information such as:
●
Your PAN and Aadhaar information.
●
Loan amount and duration.
●
Full name, age, and permanent
address.
●
Employment details and monthly
income.
This information will help the lender analyse
whether the borrower fits their eligibility criteria.
Step 2. Uploading the
Required Documents
After completing the form, you have to upload
some documents for verification of identity, address and income. Some of the
documents needed are as follows.
●
Identity proof (e.g Aadhaar card,
PAN card).
●
Address proof (e.g utility bill,
voter ID).
●
Proof of income (e.g salary slips,
bank statements).
Some loan providers may allow online
verification using your Aadhaar-linked mobile number to simplify the
verification process.
Step 3: Credit Check
and Eligibility Assessment
Once your details have been verified, the
lender assesses your eligibility based on:
●
Credit score.
●
Monthly income.
●
Current employment status.
The lenders also check your existing debts, as
this helps them evaluate your overall financial condition and ability to repay
the new loan. A strong credit history, combined with a steady income, may
increase your chances of being approved.
Step 4. Receiving the Loan Offer and
Finalising the Agreement
If eligible, you will receive a loan offer
that has details about:
●
Approved loan amount.
●
Rate of interest.
●
Tenure of the loan.
●
Processing fees, if applicable.
●
Total repayment amount.
A personal loan EMI calculator can be used at
this step to calculate the amount that will be paid every month. Once you have
agreed to the terms, a digital loan agreement is generated for your electronic
signature.
Step 5. Repayment
Process
Repayment is made through Equated Monthly
Instalments (EMIs), which are automatically deducted from your bank account on
the predetermined date each month. Therefore, borrowers should maintain an
adequate balance to avoid unnecessary penalties or missed payments.
Some lenders provide prepayment or foreclosure
facilities through which the loan can be paid off early. However, these
features may incur additional costs, depending on the lender.
Things to Keep in Mind Before Applying for an Online Personal Loan
The following factors should be kept in mind
to make an informed decision.
●
Interest Rate: The interest rates may vary
depending on your credit history and the lender's policies.
●
Loan Tenure: Choose a tenure which offers
affordable EMI, along with the least amount of interest being paid.
●
Hidden Charges: Beware of processing charges,
late fees, or prepayment charges.
●
Repayment Capacity: Use a personal loan EMI
calculator to align the EMI with your monthly expenses.
Conclusion
Online personal loans may offer a simpler and
faster borrowing process. With easy application steps, swift approvals, and
direct disbursal of the loan amount, these loans may be preferable for meeting
urgent needs or unexpected expenses. Like any financial instrument, however,
they require thoughtful consideration of your repayment capacity, loan terms,
and charges. Before applying, use a personal loan EMI calculator to assess your
repayment ability. Even though the process of applying for a loan is simplified,
one must always practice responsible borrowing to maintain good financial
health in the long term.