Kathmandu. A loan is a service to borrow money today, pay interest for the period of use and pay back money at the end of the term or at the end. Loans are taken out when savings are insufficient. Loans are disbursed for both capital formation or consumption.
Principles of 5C’s to be followed when granting loan{
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Cash Flow, Capital, Character and Past Financial History, Collateral and Terms, Rights and Duties
Step-by-step process of borrowing
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1. Loan application
To begin with, the applicant has to fill up the loan application form in the format specified by the bank or financial institution and submit the identity document (citizenship/PAN card), asset, liability, proof of income and projection and all the documents related to the pledged property.
2. Borrower’s Valuation
On the basis of the application, the borrower’s ability to repay, self-investment, creditworthiness, mortgage security, and other criteria are evaluated.
3. Loan Sanction
If the appraisal is found satisfactory, the loan is approved by the bank. The applicant is then given an acceptance letter, in which the total amount of the loan sanctioned, the structure of the interest rate, and the schedule of the repayment period, among other conditions, are clearly written.
4. Loan Flow
After the completion of all the legal paperwork including collateral, guarantee, the bank and financial institution transfer the loan amount to the borrower’s bank account in one go or multiple times.
5. Monitoring & Payment
Banks and financial institutions monitor the utilization of loans from time to time. Borrowers should pay the principal and interest of the loan on time and monitor their accounts regularly.
Borrower’s Rights and Obligations
Matters such as adequate information, fair dealing, confidentiality, complaints, problem solving, special protection of small customers are the rights of the borrower. It is the responsibility of the borrower to give correct information, study the terms, make good use of the loan and follow the discipline of the borrower.
