Question

By which process does bank provide loan to a person?

Hint:

The loan process involves application, credit evaluation, approval, disbursement, and repayment, ensuring that both the bank and the borrower meet their obligations.

Answer 1

Banks provide loans to individuals through a well-defined process that ensures both the borrower and the bank are protected. Below are the main steps involved in the loan disbursement process:
Step 1: Loan Application.
The first step in obtaining a loan is to submit a loan application to the bank. This application typically includes personal information, income details, employment status, and the purpose of the loan. The applicant may need to provide documents such as identity proof, address proof, and income proof, depending on the type of loan.

Step 2: Credit Evaluation.
Once the application is submitted, the bank evaluates the borrower’s creditworthiness. This is done by reviewing the applicant’s credit score, financial history, and ability to repay the loan. Banks use this evaluation to assess the risk involved in lending money.

Step 3: Loan Approval and Terms.
If the applicant meets the bank’s criteria, the loan is approved. The bank then sets the terms of the loan, including the loan amount, interest rate, repayment schedule, and tenure. The terms are communicated to the borrower, who must agree to them before the loan is disbursed.

Step 4: Loan Disbursement.
After the terms are agreed upon, the loan is disbursed to the borrower. The disbursement can be in the form of a lump sum or as a series of installments, depending on the type of loan. For example, a home loan might be disbursed in phases, whereas a personal loan is usually given as a one-time amount.

Step 5: Repayment.
The borrower begins repaying the loan according to the agreed-upon schedule. The repayment includes both the principal amount and interest. The bank monitors the repayment and ensures that the borrower adheres to the schedule.