Personal Loan Approval Process

Today, most of the banks are focusing on online methods to do away with the complex documentation procedures and to accelerate the entire loan approval process. Also, the demand for such loans is higher these days. Typically, a Personal loan approval involves the following steps:

  1. Loan application
  2. Discussion with the lender
  3. Background verification by the bank
  4. Signing in of necessary documents
  5. Loan sanctioning and disbursement
Updated On - 02 Oct 2025

Processing of Loan Application

Ideally, banks should acknowledge the receipt of a loan application within 7 days from the date of request. After the basic examination of the details furnished by the applicant, banks should intimate the person and issue him a registration number.

Further documents to be submitted for loan approval should also be mentioned in the intimation letter. In cases where initial application fails to meet the eligibility criteria, the lender organization must return the application and communicate the reason for rejection. Banks also check your CIBIL report for written-off loans, payment history details, and EMI-income ratio to determine your eligibility.

Approval of a Loan

The time taken for approval of a personal loan depends on the authenticity of the information provided by you. On approval, borrowers may either be offered a fixed rate of interest on the loans or a floating rate. Floating rates change according to the fluctuations in market. For the bank to approve loan request, you will have to submit the following documents:

  1. Bank statement
  2. Identity proof and address proof
  3. Salary statement
  4. Income tax statement

It is advisable that you maintain a decent credit history to smoothen the entire process of loan approval. Paying dues at the right intervals and reviewing your credit status from time to time will help you in improving your scores. Before applying for loan, you can also check your eligibility through the loans webpage of the respective bank. You just have to fill out some basic information to know whether you are eligible for a particular loan or not.

FAQs on Personal Loan Approval Process

  • How long does it take for a personal loan to get approved?

    Once you submit your loan application and the required paperwork, the lender starts the approval process. The approval process may take two to three working days, depending on the lender you select; if necessary documentation is not submitted, the approval process may take longer.

  • What plays a crucial role in the loan approval procedure?

    Keeping your credit score high is essential if you're thinking about applying for a personal loan in India. Lenders use your credit score to assess your repayment history and decide whether to approve your loan application. 

  • Are personal loans accepted in all cases?

    The most frequent reasons for personal loan denials are related to your income, credit history, and credit score. Applicants for personal loans who have bad credit, damaged credit, or no credit at all usually have trouble being approved. 

  • What steps are involved in getting a loan approved?

    The order of an appraisal, survey, title insurance, loan documentation, and any other necessary materials comes next, if the terms and circumstances are acceptable to both the applicant and the lender. Upon receipt, the materials are examined to make sure they satisfy the conditions for loan approval. 

  • How is personal loan eligibility calculated?

    An applicant's monthly net income, excluding one-time bonuses and incentives, with existing EMIs, is considered to determine loan eligibility. A higher income with low liabilities increases the chances of getting a faster approval for your personal loan. 

  • What is personal loan approval process?

    The personal loan approval process involves application submission, credit and financial assessment by the lender, documentation verification, and approval or rejection decision. Lenders consider credit history, income, debt-to-income ratio, and other factors. 

  • After being approved, can I cancel my personal loan?

    No, once the funds are credited to your account, you are unable to withdraw your application for a personal loan. Nevertheless, you still have time to withdraw your application for a personal loan before the funds are released. 

  • What is the loan processing fee?

    The bank must pay certain administrative expenses in order to process and approve your loan. This is normally a tiny sum, ranging from 0.5% to 2.50% of the overall loan amount, and it varies from bank to bank. 

  • Is getting a personal loan difficult?

    You will generally be able to investigate more low-interest personal loan options the higher your credit score is. You will have a better chance of getting a cheap interest rate and advantageous terms on your loan if you have what is known as a good or outstanding credit score, which is often 670 or above. 

  • How quickly can we finalise a personal loan?

    Generally, the borrower can pay off the personal loan early after a year or by making at least 12 EMI payments. The borrower will be required to pay the current month's EMI, any unpaid balances, and foreclosure costs when the loan is foreclosed. 

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