In today’s world of banking every financial requirement of an individual can be met with innumerable varieties of financial products in form of loans. There are varied kinds of loans for every requirement for which apers wants to avail the funds to fulfill a particular purpose like to meet personal expenses, medical emergency, wedding expenses, purchasing a property, home renovation, expansion of business, purchasing of machinery etc. So to avail these loans, apart from fulfilling the eligibility criteria an applicant must also face the personal discussions for loans applied. This personal discussion is conducted by the credit manager or the sanctioning authority of the lender bank or NBFC where the application has been submitted. To make a personal discussion successful an applicant must know how to face the personal discussion for loans.
The personal discussion for loans depends majorly upon the profile of the applicant and the purpose for which the proposal of the loan so applied for and it varies accordingly particularly depending upon the purpose for which the fund is required to be availed.
Today we will discuss the process of facing personal discussion for loans of every kind and how one can get a successful result to get the proposal sanctioned by the credit manager or sanctioning authority as the case may be.
There are so many instances where the proposal of the loan applicant gets rejected or the sanctioned amount does not fulfill the requirement due to unsuccessful personal discussions for loans.
What is a personal discussion for loans?
The meeting or discussion between the lender and borrower prior to sanctioning the loan is referred to as a personal discussion for loans.
During the personal discussion, the credit manager or sanction in authority of the lender bank or NBFC might ask about the purpose of the loan, the financial background, and the repayment strategy of the borrower.
Generally, the credit managers or sanctioning authority of the lender bank or NBFC consider five factors when reviewing the loan application such as the credit scores, credit history, income, debt-to-income ratio and planned loan use.
Why the personal discussion for loans is done?
The personal discussion for loans is done to assess the probability of default or PD, which is the likelihood that a borrower will fail to pay back a certain debt. For businesses, the probability of reflected. For individuals, credit default risk.
The probability of default or PD quantifies the likelihood that a borrower will not be able to meet its contractual obligations and will default. Default does not necessarily lead to immediate losses, but may increase the likelihood of bankruptcy and, hence, subsequent losses.
How personal discussion for Loans are done?
A personal discussion for loans can be telephonic or physical where the credit manager can either have a video conferencing or can visit the workplace or business place or residence or may ask the applicant to come to the office of the lender bank or NBFC as per the case.
The depth and intensity of the personal loan discussion for loans with the credit manager or sanctioning authority depends upon the profile of the applicant and the proposal for which the loan has been applied.
For example, if an individual is a salaried person in a CAT-A company and drawing a formidable salary without any default in his or her credit history and has applied for a personal loan then a single video conferencing call or a normal telephonic personal discussion for loans can take place just to get the confirmation from the applicant regarding the sanctioning amount that whether the said amount is going to fulfill the purpose or not.
In case of Personal Loan for salaried person:
The purpose of personal loans for the salaried persons are only limited to meet the end uses like medical emergencies or wedding or home renovation or debt consolidation or expenses related to other personal requirements. They are not provided funds for any other purposes like starting new businesses or expansion of any business of his or her relatives or buying machinery.
A salaried person can opt for consumer durable loans for buying household amenity like TV, refrigerator, mobile phone etc. Similarly a salaried person can opt for a car loan to purchase a
new or used car. In all these cases the end use is fixed and for that reason, no personal discussion for loans is required.
In case of unsecured Business Loan:
In the case of unsecured business loans for self-employed professionals like doctors chartered accountants or engineers, a personal discussion plays a pivotal role in determining the amount of the loan.
This is because an unsecured business loan for self-employed professionals is only provided for the expansion and upliftment of the present business so that the applicant can achieve the desired business level for the betterment of the profitability after infusing the fund borrowed as a loan.
So to assess the probability of default or PD the credit manager or the sanctioning authority of the lender bank or NBFC goes through the minute details like unsecured credit track provided by other financial institutions based on criteria, business model and employment history, repayment capacity, income level, professional qualification and credit history. The applicants are asked questions based on the documents and data so submitted during the application of the loan as well as the records found there after.
The self-employed non-professionals like business persons are scrutinized more elaborately by the credit manager or the sanction in authority in personal loan discussion for loans.
Apart from the minute details as mentioned earlier they are also asked regarding the prospect of the business in the future considering comparison of business performance year on year basis.
So being an entrepreneur, a self-employed non-professional must have a clear idea about his or her future planning of the business with the fund availed in the form of unsecured business loan.
In case of Home Loan:
Home loan is considered to be the most easily availed loan among all the loan products presently available in the banking industry from the perspective of successful personal loan discussions for loans. This is because the purpose of the loan is very clear from the very beginning of the loan application.
But personal discussion for loans also takes place where the credit manager or sanctioning authority of the lender bank or NBFC generally inquires about the selected property which has been proposed to be financed and if required some information related to minute details business model and employment history, repayment capacity, income level, professional qualification and credit history as per the profile of the borrower.
In case of Working Capital Loans like Cash Credit or Overdraft and Term Loans for Businesses:
Working capital loans like cash credit or overdraft and term loans are only provided to self-employed non-professionals who are into manufacturing and trading business where as
Overdraft and term loans are provided to service providers. These loans can be both secured and unsecured.
Working capital loans like cash credit are short-term secured or unsecured short-term working capital loans provided only by the scheduled banks for a maximum period of twelve months on a renewal basis which is offered to micro, small and medium enterprise businesses to cover and fulfill the financial obligations related to regular expenses of the businesses like procurement of raw materials, payments of wages and salaries to labourers and staffs, repairs and maintenance of plants and machinery, payment of business creditors and debt consolidation etc.
So for the personal discussion for loans like cash credit and overdraft, the applicant must have documented financial requirements along with all the valid documents for such loans apart from the other credentials as per the parameter of the lender bank.
The borrower must be very clear about the end use as discussed for a successful personal discussion for loans like cash credit.
An overdraft is a credit facility that allows money to be taken out of a current even if the balance falls below zero. It is a form of monetary limit extension provided by banks, and the money is referred to as ‘overdrawn.
Each customer is given an allowed overdraft limit based on their profile and relationship with the bank. The amount can be availed both for personal and business purpose.
So the personal discussion for loans like overdraft the applicant have to be very much particular about the purpose for which the overdraft facility to be induced in the business.
A term loan is a short-term or long-term loan which may be an unsecured or a secured one provided by both schedule banks and non-banking financial companies (NBFCs) and fin tech companies as well for a fixed tenure to fulfill the financial needs of an entrepreneurial organization to meet up the variable expenses, fixed expenses and capital expenses of the organization which may or may not be related to the business.
The term loans have a longer repayment period, ranging from one year to the maximumof15 years to a decade.
A term loan is always considered to be an ideal one for long-term investments related to business, such as purchasing assets or expanding operations.
The purpose to avail a term loan must be convincing to the credit manager or sanctioning authority of the lender bank or NBFC as then Duse of the fund should be as per the policies of the lender bank. The purpose of availing the loan should only be related to business and its development.
No fund should be deviated to any speculative businesses like share trading or lottery or gambling. If any clue or hint of such intentions are found by the credit manager or the sanctioning authority then the personal discussion for loans will be nullified with the rejection of the proposal.
In case of Loan against Property:
Loan against property is a secured loan which is provided to an individual who can be a salaried person or a self-employed professional or a self-employed non-professional against a property which can be a self-owned residential property or self owned commercial property or self-owned industrial property.
The fund availed under loan against property must have a specific purpose such as medical emergencies, wedding purpose, home renovation, debt consolidation, business expansion, incurring fixed expenses etc.
The purpose of availing loan against property for salaried persons must be for the end uses like medical emergencies wedding home renovation land and building purchase or debt consolidation or expenses related to other personal requirements.
The personal discussion for loans like loans against property for salaried persons are done in a very strict manner by the credit manager or sanctioning authority to assess the probability of default.
So being an applicant for a loan against property a salaried person must be very clear about his or her end use of the fund. In case of self-employed professionals and self-employed non-professionals, the personal discussion for loans like loans against property is provided in the individual name of the applicant keeping the business as co-applicant or guarantor.
The purpose to avail the fund can be anything related to his or her personal matters or business matters but not for any purpose which are related to speculative businesses or gambling.
The credit manager or sanctioning authority of the lender bank or NBFC must be very clear about the end use of the fund and that should be as per the policies of the lender bank or NBFC.
The personal discussion for loans like loan against property for self-employed professionals and self-employed non-professionals gets successfully done after the checking of minute details like credit track provided by other financial institutions based on criteria business model and employment history, repayment capacity, income level, professional qualification, credit history and assessment of probability of default.
Conclusion:
The meeting or discussion between the lender and borrower prior to sanctioning the loan is referred to as personal discussion for loans. The process usually starts by the lender physically visiting the borrower’s place of business or residence to as certain his or her creditworthiness and do a thorough background check to assess the repayment capacity of the borrower and probability of default.
Being a loan applicant every individual must be very specific about the purpose for which the loan has to be availed and the amount required for such end use. A successful personal discussion for loans mostly depends upon the product which is chosen to fulfill the requirement.
Selection of the wrong loan product to meet the requirement is the first and foremost thing that one should avoid because once that is done then the whole process may get jeopardized at the end when the credit manager or the sanction in authority will go for the personal discussions for loans and assessment of the probability of default.
