Kathmandu. The Nepal Rastra Bank (NRB) has advised the general public to understand their income, ability to repay, mortgage and terms related to loans before taking loans. The central bank has issued a message with the aim of raising financial awareness, informing about the process of taking loans, the rights and obligations of the borrower.

According to the Rastra Bank, when the savings are insufficient, the loan can be taken as per the need. The loan is disbursed for both capital formation and consumption purposes. However, before taking a loan, it is necessary to analyze its purpose, cost, return, and potential risk.

The Rastra Bank has said that banks and financial institutions will pay attention to five main factors while granting loans. Cash flow, capital (capital), character and past financial history of the borrower, mortgage and security, and terms and rights and duties related to loans are the main basis of loan evaluation. According to the Rastra Bank, these grounds are considered as the principles of Five-Cs.

According to the Rastra Bank, the applicant should complete the following five steps before taking a loan:

TAG_OPEN_strong_16

1. Loan Application: The applicant should fill out the loan application form in the format prescribed by the bank or financial institution. Along with this, the necessary documents such as citizenship or PAN card, details of assets and liabilities, proof of income and mortgaged property should be submitted.

2. Borrower’s Evaluation: Banks and financial institutions evaluate the applicant’s income, ability to repay loans, self-investment, past financial history, and mortgage security. On the basis of this, it is analyzed whether the applicant is in a position to repay the loan or not.

3. Loan Approval: Banks and financial institutions approve the loan if the assessment of the applicant’s financial condition and ability to repay the loan is satisfactory. The approval letter clearly mentions the total amount of the loan, the structure of the interest rate, the repayment period and other conditions.

4. Loan Disbursement: After the loan is approved, the collateral, guarantee and necessary legal procedures should be completed. After that, the banks and financial institutions provide the approved amount to the borrower’s bank account in one go or in a phased manner.

5. TAG_OPEN_em_17 Monitoring and Payment: After the loan is disbursed, the banks and financial institutions monitor the utilization of the loan. The borrower should also use the loan amount as per the approved purpose and pay the principal and interest as per the prescribed timetable.