Personal Loan Verification Process - Check 4 Easy Steps

A personal loan is a simple and convenient way to finance a range of personal requirements such as festive season shopping, splurging on a wedding, painting or renovating a house, going on a vacation overseas and even to manage emergency medical bills.

Thanks to growing competition, many banks and non-banking finance companies (NBFCs) sanction personal loans via a quick process that can even be finished digitally if one doesn’t want to visit the lender’s branch.

Personal loans are typically unsecured. This essentially means the borrower need not submit any collateral or asset as security to take out the loan. This makes it different from secured debts such as a home mortgage or an automobile loan where the asset purchased is kept as a security with the lender to cover for the risk of default.

On the flip side, this means the lender takes extra precautions while undertaking the verification process to minimise the risk of default. The verification process of a personal loan usually involves a few steps.

1) Loan Application

Filling up an application form, whether online or in the lender’s branch, is the first stage of the verification process. After submitting the loan application, the applicant gets an application number. This number can be used to track the status of the application.

2) Document Collection

Along with the application, the borrower must submit certain documents that help the lender verify their personal information, job status, income levels and other data points. These documents usually include:

Identity Proof:

PAN card, Aadhar card, driving license, passport, or any other government ID card.

Address Proof:

Electricity or gas bill, Aadhar card, passport or bank passbook.

Employment Proof:

Organisation ID card or appointment letter. Self-employed people can show business ownership certificate or partnership deed.

Income Proof:

Bank statements, Salary slips, Form 16 or income tax returns. Self-employed people can show profit and loss statement of their business venture, or the audited balance sheet.

3) Document Verification

After all the papers have been submitted, the lender begins the verification procedure. This involves confirming the prospective borrower’s basic details such as name, age and address, as well as their loan eligibility, income proofs, and credit score, or the CIBIL score.

A three-digit figure that represents the borrower’s credit profile is the CIBIL score, also referred to as the credit score. The borrower’s past or present loans and repayment history are used to determine the score.

In essence, the score provides information to the lender about the borrower’s past credit behaviour and acts as a warning in the event that the borrower has previously missed a payment on a loan.

4) Loan Sanctioning

The lender begins the process of approving the loan only after it is convinced about the borrower’s eligibility and repayment capacity. It then makes an offer to the borrower detailing the amount, interest rates, tenor, monthly installments, and other terms and conditions.

The borrower should read the loan agreement carefully before signing. After the agreement is signed, the lender disburses the loan directly into the bank account of the borrower.

Conclusion

To avail personal loans, the borrower is not required to pledge any assets to the lender. Therefore, before issuing such loans, lenders carefully review the loan application and confirm the CIBIL score as well as the appropriate documentation. The borrowers must make sure all the paperwork is in place before applying for a personal loan. To avoid unpleasant surprises later, the borrower should thoroughly read the loan agreement.

Importantly, borrowers should take out a loan only from reputed lenders such as IIFL Finance to avoid falling for the growing number of loan scams and to ensure they get the loan quickly and without any hassles.

IIFL Finance, one of India’s biggest non-banking finance companies, offers personal loans through a fully online process that can be completed within a few minutes and the loan can be disbursed in just a couple of days after thorough verification of all documents.