Loan origination is the process by which a borrower applies for a new loan, and a lender processes that application. Origination generally includes all the steps from taking a loan application through disbursal of funds (or declining the application).
The first time you are getting a loan, it can be confusing what all is needed and how to start. This outlines the steps to getting a loan from picking a lender to closing. Following are the various stages involved in getting Loan:
Banks offer the loan amount only after checking your profile & based on various eligibility criteria’s like age, income & salary banks lend you the money.
Comparing Lenders can be a daunting task. All the components of a loan including the Interest rate, Processing Fees, Foreclosure Charges and others play a critical role in selecting a Loan offer. Fortunately, you can get the Rate of Interest from each lender for each of their programs. The Interest Rate is basically an interest rate calculated with the base interest rate plus margin. Zero Foreclosure Charges would be great, but it is typical to have a Processing Fees of about 0.50%-1.00%, credit application fees, document preparation fees, and the appraisal fee. When comparing rates, the lower the interest rate, the less interest you will pay over the period of the loan. When comparing the Rate of Interest, you are comparing the interest rate plus other costs. This is helpful because some quoted interest rates may seem low until you realize that the lender is charging you some more for that better rate.
After you have selected your lender, you have to fill in the application form wherein the lender requires complete information about your financial assets & liabilities; other personal & professional details together with the property details & its costs if it is secured loan.
SYou are required to submit the necessary documents to the bank which will be verified together with the details in the application. The details mentioned by you in your application will be verified by contacting you through our staff / agencies appointed by bank for this purpose at your business address/ residence.
Before lending you any money Banks assess whether you will be able to repay it. Banks shall carry out proper assessment of your loan application by carrying out detailed due diligence and appraisal.
Bank checks out the borrower’s loan eligibility (through repayment capacity) & the amount of loan is confirmed. The borrower’s repayment capacity is reached which is based on the income, salary, age, experience & nature of business etc. Bank also checks credit history through the CIBIL Score which plays a critical role in deciding & approving your loan application. Low Credit Score implies that the bank upfront rejects your application on the basis of earlier credit defaults; on the other hand high credit score gives a green signal to your application. Apart from these, Banks also considers your business plan, cash flow, profitability and existing financial commitment and the way you have handled your finances in the past.
After the credit appraisal of the borrower bank decides the final amount & sanctions the loan, the bank further sends an offer letter to the borrower which constitutes the details like rate of interest, loan tenure & repayment options etc. The borrower needs to send an acceptance copy to the bank after the borrower agrees with the terms & conditions in the offer letter.
The bank further asks the legal documents of property from the borrower to check its authenticity so as to keep them as a security for the loan amount given. The next step involved is the valuation of the property by the bank which determines the loan amount sanctioned by the bank.
The borrower signs the loan agreement & the bank disburses the loan amount.