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Personal Loan Applications: How Are They Processed?

When you need extra money for family and personal emergencies such as a wedding or hospitalisation, you might decide to go for a personal loan. Personal loans are a convenient way of getting additional funding because they require fewer documents and are processed faster than any other retail loan.

How to Apply For Personal Loan

There are several ways to apply for a personal loan:

1. Online application: This can be done easily if you have an account with the bank from which you intend to take the loan. But even if you don’t have a net banking account with the bank, you can apply online through the bank’s website. The bank will prompt you with forms to fill through which you can check your eligibility and proceed to filling up the application form online. You also need to upload scanned copies of the documents required for the processing to begin.
2. Email and phone banking requests: You can leave a request for personal loan with the bank through an email or at the customer service centre of the bank. The bank will review your eligibility and contact you to take the process further.
3. Request through ATM machine: Nowadays you can apply for personal loan via ATM kiosks as well. Once you raise a request the bank personnel will contact you.
4. Offline request at branch: Walk into the nearest branch of the bank of your choice and request for a loan with your relationship manager.

If you already have an account with the bank from where you want to take the loan, the processing would be faster. Eligible customers can also get instant loan approval and have the loan amount remitted to their account within a day or two.

How Personal Loan Applications are processed

The process of sanctioning of a personal loan is simpler than property loans such as home loan and car loan. This is because, in case of property loans, the bank has to verify not just your financial information, but also the credibility and eligibility of the asset that you are purchasing with the loan amount. For personal loan, you are the collateral security yourself, so the bank has to do a background verification only on you.

• Once the bank receives your loan application, it will check the information provided by you against the data available with them, such as bank balance, salary deposits made into your account, EMIs being deducted from your account, etc.
• The bank will cross-check and confirm your identity and address details through your Know Your Customer (KYC) documents. Banks may visit you at home to confirm your place of residence and check with your office on your employment tenure.
• The copy of your Income Tax Return or salary payslips will help the bank gauge your repayment capacity. This will help determine how much loan amount the bank is willing to sanction to you.
• Some banks might ascertain your credit-worthiness by finding out your CIBIL score. The higher the CIBIL rating, the more your chances of getting the loan approved.
• The bank will also review your age, number of years of employment left, and salary growth prospects, to decide how much loan it can approve for you and what the repayment period should be.

The two key elements in ensuring approval for your personal loan application are to maintain a credit score of 750 or more, and to ensure that you provide all the documents sought by the bank. Once the loan is availed, the onus of repayment lies with you and the bank can levy penal interest on outstanding balance if EMI is not paid on time. If you miss several EMIs, the bank can also take legal action.