Personal loans have become a popular financial tool to meet various personal expenses such as medical emergencies, education, weddings, or home renovations. While personal loans offer quick access to funds, it is essential to understand the disbursal process to ensure a smooth borrowing experience. Let us read on to understand the personal loan disbursal process and the factors that influence the same. 

Steps Involved in Personal Loan Disbursal

Step 1: Application:

The first step towards obtaining a personal loan is submitting an application to a financial institution or a lending platform. Most lenders offer online applications, simplifying the process and saving time for borrowers. 

Eligibility Criteria Documentation:

Before applying for a personal loan, it is essential to determine if you meet the eligibility criteria set by lending institutions. While specific criteria may vary across banks and financial institutions, some common factors include:

a) Age: Generally, applicants should be between 21 and 60 years old. However, some lenders may extend the upper age limit to 65 years for salaried individuals.

b) Income: Lenders typically require a minimum income threshold, which varies based on the city of residence and the borrower's employment status.

c) Credit Score: A good credit score demonstrates your creditworthiness and increases your chances of loan approval. Since it shows sound credit handling ability, lenders are more interested in individuals with credit score of 750 or above.

d) Employment History: Stable employment with a consistent income source is crucial. Salaried employees should have a minimum work experience of 2-3 years, while self-employed individuals must demonstrate a stable business history.

The application typically requires basic personal information, such as name, address, income details, employment history, and purpose of the loan. Additionally, applicants may be asked to provide supporting documents such as identity proof, address proof, income proof, bank statements, and photographs.

Step 2: Verification:

Once the application is submitted, the lender begins the verification process. This step involves scrutinizing the provided information and documents to ensure their authenticity and accuracy. Lenders assess the creditworthiness of the borrower by checking their credit score, which reflects their credit history and repayment behaviour. Additionally, lenders verify employment details, income stability, and other relevant factors to evaluate the applicant's ability to repay the loan.

Step 3: Loan Approval:

After completing the verification process, the lender assesses the loan application and determines whether to approve or reject it. This decision depends on various factors, including the borrower's creditworthiness, income, employment stability, and the lender's internal policies. Some lenders may require collateral or a guarantor for certain loan amounts or when dealing with borrowers who have a low credit score. If the loan application is approved, the borrower receives an offer letter or loan agreement specifying the loan amount, interest rate, repayment tenure, and other terms and conditions.

Step 4: Acceptance:

Once the loan offer is received, the borrower must carefully review the terms and conditions before accepting the loan. It is crucial to understand the interest rate, processing fees, prepayment charges, late payment penalties, and other associated costs. If the borrower agrees to the terms, they can provide their acceptance through a signed agreement or an online acceptance process.

Step 5: Disbursal:

After the borrower accepts the loan offer, the lender proceeds with the disbursal of funds. The disbursal process can vary depending on the lender and the mode of disbursement. In most cases, lenders transfer the loan amount directly to the borrower's bank account through electronic funds transfer (EFT) or a direct bank transfer. Some lenders may issue a demand draft or a check in favour of the borrower, which can be encashed or deposited into their bank account.

Factors Affecting Disbursal

Several factors influence the personal loan disbursal process:

  • Creditworthiness: A good credit score increases the chances of loan approval and ensures quicker disbursal. Lenders perceive borrowers with a higher credit score as low-risk individuals.
  • Income and Employment Stability: Lenders assess the borrower's income level and employment stability to evaluate their repayment capacity. Salaried individuals with a stable income and employment history are more likely to receive faster disbursals.
  • Documentation: The accuracy and completeness of the documents submitted by the borrower play a crucial role in expediting the disbursal process. Any discrepancies or missing documents can delay the approval and disbursal.
  • Internal Processes: Each lender has its internal processes, which can affect the disbursal timeline. Some lenders may have more streamlined procedures and faster turnaround times compared to others.


Obtaining a personal loan in India involves several steps, from application to disbursal. Understanding the personal loan disbursal process helps borrowers navigate the system efficiently and make informed decisions. It is essential to maintain a good credit score, provide accurate documentation, and choose a reliable lender to ensure a smooth and timely disbursal of funds. By following these steps and considering the influencing factors, borrowers can access the required funds to meet their financial needs effectively