Understanding the Loan Approval Process in India

Loan approval process in India

If you are not well-prepared, the loan approval process in India can be intimidating and overwhelming. Let’s understand the loan application procedure step by step in this tutorial. Applicants will learn that the key stages and specifics differ from one lender to the next. However, the loan approval process is, for the most part, the same for all lenders. Now, let’s look at some of the stages involved in applying for a loan.

Stages of Loan Approval Process

Loans are versatile and can be used for almost any reason, including debt consolidation, weddings, and paying children’s education.

1. Status of eligibility

Determine why you require the loan and how much you require to meet those demands before applying. Check your credit score to check whether you are eligible for the loan.

2.Interest rates and other fees

Different financial institutions charge different interest rates based on factors such as creditworthiness, loan length, and loan amount. So, go to the lenders’ official websites and compare the prices. Choose the most fair and economical charges. Consider the processing fee and any other fees that the lender may levy.

3. Determine the EMI

Most lenders offer EMI calculators online. It assists in calculating your monthly EMI for the required loan amount as well as understanding your repayment burden. There are numerous EMI calculators available online that are simple to use and free of charge. 

4. Document requirements

The process of obtaining a loan begins with the submission of an application form. A few basic pieces of information about the applicant will be required for this loan application. This usually includes:  

  • The applicant’s personal information (name, phone number, etc.) 
  • The applicant’s residence address 
  • The applicant’s monthly or annual income
  • The applicant’s educational background
  • The applicant’s employment information
  • The specifics for which the loan is applied
  • The estimated cost

After completing the formal application, the following step is to attach all of the valid documents necessary by the bank. Typically, this includes:  

  • Proof of income 
  • Identity (or ID) verification
  • Age verification 
  • Address verification
  • Details about employment 
  • Proof of education (school/diploma/degree certificates)
  • Account statements
  • Details about the property to which the loan will be applied (if finalised)

5. Submit the application

Fill out your loan application, either online or in person, and include all necessary papers. Allow time for the lender to assess your application and creditworthiness.

6. Sign the loan agreement and wait for the loan to be approved.

If your lender is satisfied with all of the information you’ve provided and has checked the safety of the property you want to buy with the loan, they’ll give you the final loan agreement. This loan agreement must be signed in person at your lender’s nearest office, as it is the only step in the process that cannot be done online. Before signing, loan applicants must thoroughly read the entire agreement and verify they understand every issue addressed. Seek clarification if anything raises worries or is unclear. Consider contacting a loan legal expert if necessary, but do not sign anything until you fully understand everything mentioned in the agreement.

Your lender will sanction and disburse the final loan amount into your account once you have completed the final loan agreement, allowing you to pay the builder and complete your home purchase.

The loan approval procedure 

Application submission, credit and financial assessment by the lender, documents verification, and approval or rejection decision are all part of the loan approval procedure. Credit history, income, debt-to-income ratio, and other characteristics are all taken into account by lenders. If authorised, arrangements are offered: money are disbursed upon agreement, beginning the repayment period. 

• Peer-to-peer lenders

The benefit of peer-to-peer lending is that you can interact directly with the person who is prepared to fund your need. It eliminates the need for middlemen and allows you to obtain a loan online with low CIBIL score. This is due to the fact that these lenders do not have a set of application standards. Similarly, the processing time is far faster than that of a bank. Finance is usually available within a few business days.  

• Online direct lenders

Online direct lenders are prevalent these days, and reputable ones are easy to find. If you have all of the necessary documentation and thoroughly fill out the form, approval should take only a few minutes. A delay occurs only when there is a discrepancy and the lender must manually check your application and supporting papers. 

• Banks

Banks have by far the longest loan approval periods due to tight lending regulations and stricter credit standards. When you apply for a loan from a bank, it usually takes a few days to a week to get authorised.

7. The Loan Disbursal

The loan amount is disbursed via cheque after the applicant signs the paperwork and everything is legally clear. However, the applicant must first provide a few important documents to the bank, which will serve as his/her personal contribution to the house property.

If the applicant is attempting to raise additional cash from outside sources, more evidence must be provided. Only then does the bank release the loan’s partial payment. The cheque is always in the name of the seller, the development/society authority, or the builder.

However, there may be a few rare circumstances. Assume the applicant has made an extra payment from his or her own account, and the cheque is presented to him or her straight by the bank.

8. Repay the loan

To avoid default and subsequent legal action, repay the loan according to the agreed-upon timeline. Many lenders also offer online information on the status of your repayment. To avoid a negative influence on your credit score, keep track of your EMI.


Take the time to investigate, calculate eligibility, and select the best loan provider, as this can have a huge impact on your total house loan experience. You may successfully handle the loan procedure if you follow our detailed loan approval process step by step. For instant loan under INR 5000 you can apply at Zap Money.



The ZapMoney app makes personal finance easy, accessible, and affordable. The App is available on Google Play Store and App Store for download, allowing you to sign up and access easy personal loans. ZapMoney is powered by Monexo Fintech Private Limited which is a registered NBFC-P2P.
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