How to Take Loan From Bank in India? Step-by-Step Process

Taking a loan from a bank can be a crucial step in achieving your financial goals—whether it’s buying a new home, starting a business, covering medical expenses, or managing unforeseen needs. To ensure a smooth approval process, it’s important to understand the eligibility criteria, required documents, and step-by-step process for applying.

If you’re planning to take a loan from a bank in India, you need to understand the eligibility criteria, documents required, and the exact application process. This guide walks you through everything step by step

Understand Your Loan Needs

Before you begin the process of taking out a loan from the bank, it is important to understand what your loan needs are. But why is it important, and what factors should you consider when choosing a loan?

Choosing the appropriate loan type is essential to securing favourable terms for your loan in India. Each loan category offers features such as interest rates, repayment durations, and processing charges. Opting for a loan tailored to your specific requirements ensures you receive the most suitable financial package.

For instance, if your goal is to refurbish your home, a home improvement loan with an extended repayment period could be optimal. A personal loan with its faster approval process might be more suitable for urgent medical expenses. By familiarising yourself with the various loan options and selecting the one that best suits your needs, you can optimise savings and streamline the repayment journey.

Once you have figured out what type of loan you need based on its features and eligibility requirements, you are ready to begin with the loan application process. There are 2 ways in which you can take a loan – online and offline. We will discuss both ways.

Personal Loan Application Process

Here’s a step-by-step view of the personal loan application process, including similarities with taking a loan from a bank.

• Online Loan Process

  If you have a bank account with net banking facilities, you are up for a treat. You can now also apply for loans online. If you have decided what type of loan you want to take, you simply need to visit the website of your bank and start applying for it. Here is a step-by-step process:

  • Go to the bank or financial lender’s website.
  • Navigate the types of loans available and click on the desired type of loan you want.
  • Press the 'apply now' button.
  • Fill out the loan application form with the necessary details and submit it to the bank.
  • The bank will review your eligibility and request the required KYC and income documents.
  • If you qualify, the bank will transfer the loan amount to the account specified in the application form.

• Offline Loan Process

  While the online loan application process is simple and convenient, some people prefer applying for a loan traditionally. For example, they can go to their bank branch and physically get their loan application process started. Below is a step-by-step guide on how you can apply for a loan in the traditional way:

  • Visit the bank or financial lender’s branch.
  • Obtain the application form for the desired type of loan and fill in all the necessary details.
  • Provide the required documents to verify your income, age, address, and identity.
  • The lender will review your documents and assess your eligibility.
  • If you are eligible, the loan amount will be deposited into your bank account.

Key Eligibility Criteria & Document Requirements

These are what banks usually look for, and what you’ll need to have ready.

• Eligibility criteria:

  • Age: Typically 21–60 years (some up to 65 for home loans or self-employed).
  • CIBIL / Credit Score: Often 700+ is good; some banks accept 650-700 if other details are strong.
  • Monthly Income: Depends on city & bank—often ₹15,000-₹25,000+ for salaried individuals.
  • Employment: Salaried or self-employed; stable income; if self-employed, business vintage matters.
  • Debt-to-Income Ratio: Existing obligations + EMIs should not be too high vs your income.
    
    

• Required Documents:

  • Identity proof: Aadhaar, PAN, Passport, Voter ID.
  • Address proof: Aadhaar, utility bills, rental agreement.
  • Income proof: Salary slips (last 3 months), bank statements (6 months), ITR (2 years) for self-employed.
  • Employment proof: Appointment letter or certificate, or business registration for self-employed.
  • Additional: Passport-size photo, signed application form, and sometimes proof of existing debts or liabilities.

Tips to Improve Loan Approval Chances

• Maintain a CIBIL score of 700+.
• Apply with banks where you already hold an account/salary relationship.
• Keep your debt-to-income ratio below 40%.
• Submit complete and correct documents to avoid delays.
• Avoid multiple loan applications within a short period (hurts credit score).

Simplify Your Loan Process with Freo

Applying for a loan can feel overwhelming, but it doesn’t have to be. Freo makes it easier by offering instant personal loans up to ₹5 lakh with a fully digital process.

• Instant approval & disbursal directly into your account.
• Flexible repayment options with EMIs.
• Top-up facility to reuse your credit line.

FAQs:

1. How do I check the status of my loan?

   After submitting your loan application, you can track its status by visiting the lender's website. Once the loan is approved, the funds will be transferred to your bank account within a few hours.

2. How long does it take for a personal loan application to get approved?

   The time required to secure a personal loan can vary significantly, ranging from just a few hours to several weeks. This duration depends on factors such as the lender's processing efficiency and how well-prepared the applicant is.

3. How do I check the status of my loan application?

   Most banks allow you to track your loan status online using your application number or via customer care.

4. How long does loan approval take?

   For personal loans, approval can take a few hours to 3–5 days. Home loans and education loans may take 7–15 working days.

5. What is the minimum CIBIL score for a bank loan?

   Most Indian banks prefer 700+, but some may accept applications with 685+ if other eligibility factors are strong.

6. Can I get a loan with a salary of ₹20,000 per month?

   Yes, some banks and NBFCs provide personal loans for ₹20,000–25,000 monthly income, but loan amount eligibility will be lower.

7. What if my loan is rejected?

   You can reapply after improving your credit score, reducing existing debt, or applying with another bank/NBFC with more flexible criteria.

8. Can I get a personal loan with CIBIL score < 700?

   Yes, but with higher interest or stricter terms. NBFCs / smaller banks might accept lower score if rest of profile is strong (income, employment, no major credit history issues).

9. Does the processing of the loan take longer if I apply offline?

   Usually yes. Offline applications involve manual steps—visiting branch, physical document verification etc.—so they take more days (5-10+).

10. If I apply online, how long does it take for disbursement?

    If everything is in order, digital KYC is smooth, you might get disbursement within 24 hours or same day; sometimes it takes 1-2 working days.

11. What if bank rejects my application after applying?

    Ask the bank for reasons (could be low credit score, insufficient income, incomplete docs). Fix gaps, then reapply. Also, explore offers from NBFCs or digital lenders.

12. Is there a difference in processing fee between banks and fintech / NBFCs?

    Yes. Fintech apps sometimes offer lower or waived fees during special offers; banks/NBFCs may charge standard 1-3%. Also, some lenders charge flat fees; some charge based on loan amount.

13. Can a self-employed person apply without salary slips?

    Yes. They may use alternative income proof — bank statements, business profit & loss statements, ITRs, GST returns etc.

14. Does applying for a loan affect my credit score?

    Yes. When bank/NBFC performs a hard inquiry, it could dip your credit score slightly. Multiple applications in short period worsen this.

15. Can pre-approved offers speed up the personal loan application process?

    Absolutely. If a lender offers a pre-approved loan, much of eligibility checks are done in advance, so you need to upload fewer docs and the process tends to be much faster.

16. How much processing fee for personal loan?

    Banks and NBFCs typically charge a processing fee of 1% to 3% of the loan amount. Some also have a minimum flat fee (e.g., ₹999). Always confirm if GST is included and check for additional charges like prepayment or foreclosure fees.