Top Reasons Why Your Personal Loan Processing is Delayed

Personal Loan processing delays often stem from common, avoidable issues related to documentation, credit history, or income verification. While a lender strives for quick loan disbursement, any hold-up at some point in the procedure can cause frustration when you need funds on an urgent basis. This blog discussed the primary causes of delays in the personal loan disbursement process, enabling you to enter the application process better prepared. Read on!

Common Factors That Delay Your Personal Loan Process

Here are the factors that may delay your Personal Loan disbursement process:

Incomplete Documentation

One of the most frequent reasons for delays in the Personal Loan disbursement process is an incomplete application. Missing details, such as your contact information or PAN number, can trigger an automated system to flag your application for manual review. 

This not only slows down the loan disbursal but also requires lenders to contact you for clarification, resulting in unnecessary back-and-forth. To ensure a smooth and speedy approval, double-check that all the necessary documents are accurately attached before submitting your application.

Also Read: Top 8 Useful Tips to Get Your First Personal Loan

Credit Score Scrutiny

Your credit history gives lenders a clear picture of your financial discipline and creditworthiness. The first thing they look for is an ideal credit score; any score below their acceptable threshold is often the cause of unwarranted delays. The lending institution would want to verify the reasons behind the low score to gauge your creditworthiness.

Lenders also scrutinise your recent credit behaviour. If you have applied for multiple loans or credit cards in a short span, it can prompt a more cautious evaluation. 

Credit History Complications

Past defaults or delayed EMI payments, even if settled, can trigger additional verification and slow down the loan disbursal process. All of these will appear on your credit report, which the lender will review. Such red flags in your CIBIL report can significantly slow down the Personal Loan disbursement, as the lender will analyse the risk involved even if your current score is high.

Additionally, any discrepancies between the details in your credit report and the information in your application, such as employer name, address, or income, may result in manual checks, which further slow down the processing timeline.

Loan Amount Issues

If the loan amount you request is significantly higher than what your income or credit score justifies, the system may flag it for reassessment. In such cases, the credit team may need to re-evaluate your profile and determine a lower, more suitable sanction amount. This naturally adds extra time to the approval process. 

It is advisable to use a Personal Loan EMI calculator to determine the loan amount that you can comfortably repay before applying.

Employer Verification

Lenders always verify your employment details as part of the Personal Loan verification process and may contact your employer for the same. If your employer does not respond within a reasonable timeframe or if the provided contact details are outdated, your application will remain pending until verification is complete. 

To avoid this scenario, it is advisable to provide the right contact person’s details and keep HR or payroll departments informed.

Also Read: Different Types Of Personal Loans In India

High Fixed Obligation to Income Ratio (FOIR)

Your Fixed Obligation to Income Ratio (FOIR) reflects the share of your earnings that goes towards existing set payments like EMIs and credit card bills. If your FOIR is already high, the lender may take longer to evaluate your repayment capacity and decide whether the loan amount you’ve requested is manageable.

Lenders may request additional income statements, adjust the repayment schedule, or even reduce the sanctioned amount. Reducing outstanding debts before applying, consolidating smaller loans, or opting for a lower loan amount can help speed up the loan agreement process.

Technical Bottlenecks and System-Related Delays

Some delays in Personal Loan application processing arise from unavoidable technical or backend issues, rather than issues with your profile. For instance, temporary glitches during Aadhaar or KYC verification, brief server downtimes, or slower third-party integrations can interrupt the flow of an application. 

In a few cases, staggered internal coordination can add minor delays, especially when applications peak during festive or financial planning periods. These issues are usually short-lived and are typically resolved quickly by the lender’s support systems.

Also Read: How to Choose the Right Personal Loan for Your Financial Needs

Lenders with Complex Verification Processes

By selecting a lender with efficient operations and strong digital infrastructure, you can minimise delays and improve the overall loan experience. Many traditional banks still employ layered, manual verification methods. Manual processes in traditional lending can slow down transactions due to human error, which can prolong the time it takes to complete transactions. 

In contrast, technology-driven NBFCs typically have smoother processing and digital-first systems. In fact, their market share in Personal Loans has grown from 27.6% to 36.4% over the past two years, indicating a rise in borrower trust and faster service expectations.

To Conclude

Delays in your Personal Loan processing can arise from a range of factors, some of which are in your control. Being proactive and ensuring your application is complete, accurate and aligned with the lender’s criteria is the best way to avoid unnecessary delays and benefit from faster loan disbursement.

If you’re looking for your next Personal Loan, Poonawalla Fincorp offers a straightforward digital Personal Loan Process designed to minimise delays and provide a seamless borrowing experience.

FAQs

What credit score is required for quick Personal Loan approval?

While the exact requirement varies between lenders, a credit score of 750 or above is generally considered excellent for a quick Personal Loan approval. A higher score demonstrates creditworthiness and reduces the perceived risk for the lender, speeding up the assessment process.

How can I track my Personal Loan Process status?

Most lenders offer an online portal or mobile app that allows you to track your loan application status using your application reference number and registered mobile number. You may also receive updates via SMS or email at different stages of the process.

Will applying to multiple loan providers speed up my loan approval?

No, it can have the opposite effect. Applying to multiple lenders in a short period generates several hard inquiries on your credit report, which can lower your credit score. This can be viewed negatively by lenders, potentially causing delays or even rejection. 

What documents are mandatory for Personal Loan processing?

Standard documents required for a Personal Loan typically include identity proof (PAN card, Aadhaar card), address proof (utility bill, passport), income proof and employment proof (salary slips, bank statements for salaried individuals; ITR and business financials for self-employed individuals), and recent photographs.

Why is my approved Personal Loan disbursement process delayed?

Even after approval, disbursement may be delayed if e-mandate registration, agreement signing, or bank account verification is still pending. Backend checks or technical issues can temporarily slow down the release. Bank holidays or third-party dependencies also affect the final payout timeline.

How to get faster approval for personal loans?

You can expedite the process by submitting accurate and up-to-date documents and maintaining a strong credit score. Choosing a lender with digital processing and instant verification also reduces waiting time. Avoid applying to multiple lenders simultaneously, as this can trigger additional scrutiny.

What is the ideal Personal Loan disbursement time?

Once approved, most financial institutions release the approved loan amount within a few hours to 2 working days. Instant loan disbursal occurs when you complete the final steps, such as setting up a mandate or confirming an agreement. Providing correct bank account details and responding promptly to the lender helps avoid delays.

Do personal loans take longer than home loans?

A Personal Loan, being an unsecured loan, is usually approved faster than a home loan. In fact, instant personal loans even offer loan disbursal within a few minutes. Home loans require property verification before drafting the loan agreement, which means you can expect a longer timeline.