Applying for a Personal Loan

Rahul needs extra funds for a family expense and visits the bank to apply for a personal loan, discussing interest rate, tenure, and eligibility with the loan officer.

Meanings in Rahul, Loan officer

Key words and phrases

personal loana loan taken for personal needs, without any specific collateralHe applied for a personal loan to cover the expense.

interest ratethe percentage charged on a loan amountThe interest rate on this loan is eleven percent.

tenurethe period over which a loan is repaidHe chose a tenure of three years.

eligibilitywhether a person qualifies for a loan based on income and creditHis salary meets the eligibility criteria.

credit scorea number showing a person's creditworthinessA good credit score gets you a lower interest rate.

collateralan asset pledged as security for a loanPersonal loans usually don't require collateral.

processing feea one-time charge for handling a loan applicationThe bank charges a one percent processing fee.

disburseto release the loan amount to the borrowerThe loan will be disbursed within three days.

repaymentthe act of paying back a loanRepayment starts from the next month.

loan officera bank employee who handles loan applicationsThe loan officer explained all the terms clearly.

EMIEquated Monthly Instalment, a fixed monthly loan paymentHis EMI comes to about eight thousand rupees.

sanction letteran official document confirming loan approvalYou will receive the sanction letter by email.

KYC documentsidentity and address proof documents required by the bankPlease submit your KYC documents for verification.

guarantora person who agrees to repay the loan if the borrower cannotThe bank asked for a guarantor for the larger loan.

foreclosurepaying off the entire loan before the end of the tenureHe plans to do a foreclosure after two years.

prepayment penaltya charge for paying off a loan earlier than scheduledCheck if there's a prepayment penalty before closing early.

loan agreementthe legal document stating the terms of a loanRead the loan agreement carefully before signing.

moratoriuma temporary period when loan repayment is pausedThe bank offered a three-month moratorium.

defaultto fail to repay a loan as agreedMissing several EMIs can lead to default.

income proofdocuments that show a person's earningsSalary slips are common income proof for loans.

Useful sentences

Ask I'd like to apply for a personal loan. What's the process?
Answer You'll need to submit your salary slips and ID proof.
Ask What is the current interest rate?
Answer It's eleven percent per annum for salaried individuals.
Ask How long can I take to repay the loan?
Answer You can choose a tenure between one and five years.
Ask Do I need any collateral for this loan?
Answer No, personal loans don't require collateral.
Ask When will the amount be disbursed?
Answer It will be disbursed within three working days of approval.
Ask What will my monthly EMI be?
Answer It will be around eight thousand rupees a month.
Ask Do I need a guarantor for this loan?
Answer No, not for this loan amount.
Ask Is there a prepayment penalty if I close the loan early?
Answer Yes, a small charge applies for early foreclosure.
Ask What documents count as income proof?
Answer Salary slips and bank statements are enough.
Ask What happens if I default on a payment?
Answer It will affect your credit score and attract penalties.

Dialogue

RahulI need a personal loan for a family expense. Can you guide me?

Loan OfficerSure. May I check your salary slips and credit score first?

RahulYes, here they are. What interest rate would I get?

Loan OfficerWith your credit score, you qualify for eleven percent interest.

RahulThat sounds fair. What tenure would you suggest?

Loan OfficerA three-year tenure would keep your EMI manageable.

RahulWill I need a guarantor or any collateral?

Loan OfficerNo, for this amount neither is required. Just submit your KYC documents.

RahulUnderstood. Once approved, will I get a sanction letter?

Loan OfficerYes, you'll get it by email along with the loan agreement to sign.

Common mistakes

Saying "take a loan of bank" instead of "take a loan from the bank" or "take a bank loan."
Saying "my credit score is high" instead of "my credit score is good" — good/poor is more natural than high/low for credit scores.
Saying "pay back the loan" and "repay the loan" as unrelated — both mean the same, but repay is the more formal banking term.
Saying "I am default" instead of "I have defaulted" or "I am in default" — default is used as a verb or with "in."
Saying "my EMI" for the whole loan instead of just the monthly instalment — EMI refers only to the fixed monthly payment.
Saying "guarantee person" instead of "guarantor" — guarantor is the correct banking term.

Quick quiz

1. What is "tenure" in a loan?

2. An asset pledged as security for a loan is called ___.

3. Complete: "The loan will be ___ within three days."

4. What does "EMI" stand for?

5. What is a "guarantor"?

6. What is a "sanction letter"?

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