Personal Loan Verification Process - How it Works

Personal Loans are one of the most sought-after financial options in India. Whether it’s a dream wedding, international travel, higher studies, house renovation, or medical emergency, Personal Loans are an all-in-one solution for all your financial requirements. 
The popularity of these loans is fueled by the fact that they are unsecured loans. This means that the borrower is not required to provide any collateral to secure a loan.
Since there are no securities in case of loan default, lenders usually remain extra careful during the Personal Loan verification process. 
Here’s a brief overview of the 4-step verification process for Personal Loans that is followed by most lenders in India:

Step 1: Loan Application

Filling up the loan application form, whether online or through a physical form filled up at the lender’s branch, is the first step of the Personal Loan verification process. After submitting the loan application form, you will be provided with an application number. Then you can use this application ID to check the status of your application. 

Step 2: Document Collection

After the lender receives a loan application, either online or offline, the lender begins the process of collecting the required documents from the borrower. For this, the lender may send a representative to collect the documents or ask the borrower to submit them in person at the branch. For a smooth Personal Loan verification process, you need to make sure that all your documents are valid and error-free. 
Though the required documents for a Personal Loan may vary from one lender to another. The following documents are generally required by most lenders:
•    KYC Documents: PAN Card/Aadhar Card
•    Address Proof: Rent Agreement/Passport/Utility Bills
•    Income Proof: Latest salary slip
•    Financial Documents: Bank statement for the past 3 months
•    Present Employment Proof: Official Email ID confirmation or Employee ID Card (in case official Email ID confirmation is not possible). 
Please note that the above-mentioned document list is indicative. Lenders may require additional documents during Personal Loan processing time.

Step 3: Verification of Documents 

Once all the necessary documents are received, the lending institution begins the verification process by forwarding the documents to the documents verification department. Most lenders generally have a separate team of professionals for conducting verifications on their own. A representative from the team is sent to the borrower’s residence to verify his/her address in person. They also visit the borrower’s workplace to verify if the individual works there. Do note that the verification team can also enquire about your salary and the number of years/months of your service in that company. 
Verification of other documents such as Aadhar Cards, PAN cards, or Passport is done online using their respective portals. 
The verification team consolidates all the findings of the verification process and forwards them to the loan officer who handles that Personal Loan account. If the lender is satisfied with the verification process findings, then the loan will be processed further. 
Else, your loan application will be declined by the lender during this stage if they are not satisfied with the verification process findings. However, the lender will communicate the reason for the loan rejection to the borrower which enables them to rectify the mistakes from their end. 

Step 4: Loan Disbursal

This is the last step of the Personal Loan verification process. As soon as the loan officer receives a positive report from the end of the verification team, the final loan agreement is drafted. At this stage, the loan repayment tenure, rate of interest, EMI amount, additional fees & charges are mutually agreed upon by the lending institution and the borrower.
Before signing the dotted line, the borrower should carefully read the fine print. After the borrower signs the loan agreement, the lenders transfer the Personal Loan amount within 24 hours directly to the applicant’s bank account. 

FAQs on the Personal Loan verification process

Q.1. At which stage the details of loan applicant is verified?
A. Once you submit all the required documents, the lender will verify your personal information, income levels, job status, and credit score to check your creditworthiness and repayment ability. 
Q.2. How to check the status of my Personal Loan verification process?
A. You can check the status of your Personal Loan verification process by calling the lender’s Personal Loan customer care department. 
Q.3. What is the Personal Loan approval time?
A. Personal Loan approval time can take anywhere between a few days to a few weeks and is usually dependent on the type of lending institution you choose and their lending policy. 
Q.4. Can I reapply for a Personal Loan if my loan application is rejected?
A. Yes, you can reapply for a Personal Loan but only after you ensure that this time you fulfil all the eligibility criteria set by the lender. Also, take necessary actions to improve your credit score and credit history. Otherwise, the lender may reject your loan application again. 
Q.5. When is the loan amount disbursed after the loan approval?
A. The lender will transfer the approved loan amount directly to your bank account within 24 hours of signing the loan agreement.