Personal Loan Approval Process

The personal loan approval process includes a number of important steps. It starts with submitting the loan application and necessary documents. Next, the lender checks your credibility based on your credit score, income level, and work experience. 

All these are evaluated in order to decide on eligibility and repayment ability. In addition to financial evaluation, credibility is also checked through a background verification process. If everything is fine with your application, the loan is approved. Banks, digital lenders, and peer-to-peer (P2P) loan websites offer personal loans. Banks may offer low-interest loans with secure service, while digital lenders may offer swift approval with low paperwork.

In order to increase your chances of personal loan approval, it is important to know the eligibility parameters. The required documents may vary based on the lender and loan type. Some of the common documents include:

• Identity Proof: Aadhaar card, valid passport, driving licence, voter ID, or PAN card

• Address Proof: Aadhaar card, valid passport, driving licence, voter ID, or utility bills

• Proof of Employment: Salary slip, official ID card, or a letter from the employer

• Income Proof: Latest 3 months' bank statement and salary slips for the last 3 months

• Photographs: 3 Passport-size photographs
  

The approval time for a personal loan depends on the accuracy of the information you provide and whether you fulfil the eligibility criteria. For online applications, approval can be instant, and funds may be disbursed within 24 hours. On average, most lenders process personal loan applications within 2 to 5 working days. 

Note: If there are discrepancies or gaps in eligibility, approvals may take up to or over 10 working days, provided the lender finds you fit to repay the loan.

To understand how to improve the chances of getting your personal loan approved, you should first learn about what factors the lenders check.

Here are the key factors that lenders in India typically check:

• CIBIL Score and Credit Report

Your credit score is one of the most important factors in loan approval. A high score indicates good credit health and improves your chances of approval.

• Employment Status and Income Stability

Lenders prefer applicants with a stable source of income. A steady job, whether in a salaried or self-employed role, increases the likelihood of approval.

• Existing Credit Facilities and Legal Cases

Lenders examine your account details, including any ongoing credit facilities or legal cases (such as suit-filed cases), which may impact approval.

• Repayment History

Your past payment behaviour matters. Any defaults or overdue payments can negatively affect your loan application.

• EMI-to-Income Ratio

Banks assess whether your existing EMIs exceed 50% of your monthly income. If your EMI obligations are too high, your loan approval chances decrease.

To increase your chances of loan approval, you need to maintain financial discipline and meet lender requirements. 

Here are some key steps you can take to get a quick approval:

• Maintain a Good Credit Score

A higher credit score reflects better creditworthiness, making lenders more likely to approve your loan

• Ensure a Stable Income

Lenders prefer applicants with a regular and steady income source, as it assures them of timely repayments

• Provide Accurate Documents

Submit all required documents correctly and ensure they are up to date to avoid processing delays

• Meet the Lender’s Eligibility Criteria

Each lender has specific eligibility requirements. Check and fulfil them before applying to increase approval chances

• Manage Your Existing Debts

If your existing EMIs exceed 50% of your monthly income, consider clearing some debts before applying

• Choose a Suitable Loan Amount

Apply for a loan amount that matches your repayment capacity to improve your chances

The loan approval process varies across lenders, but if you follow good financial practices, you secure quick loan approval. By maintaining a strong financial profile and ensuring all documentation is in order, you can improve your chances of getting a personal loan without delays.