People who apply for a loan generally want the money in their own account as soon as possible. But it can take time from application to approval and payout. Read this article to find out how quickly loans are approved, what the differences are and how you yourself can help speed up the approval process.
What factors play a role in the approval of a loan?
The approval and thus the speed of disbursement of a loan depends on several factors. These are mainly:
- The amount of credit
- Documents required for approval
- The processes for loan approval at each bank.
The amount of credit
Before a loan is disbursed, the bank must verify that the customer is able to repay it. Finally, there is some risk of default for the bank. Logically, the higher the loan amount, the higher this risk is as well. For this reason, the amount of the loan plays a critical role in how quickly it is approved. Small loans – usually up to a limit of 1.000 Euro – 10.000 euros – are subject to fully automated checks by most providers. Here, a computer queries the applicant's current credit score to assess their creditworthiness. In addition, you often have to agree to an electronic view of your account. Using the information gathered from this, the software calculates how high the risk of a loan default is. This process usually takes place within a few minutes. The approval of such small loans is therefore usually very fast.
If it's a larger loan, the risk to the bank is also greater. Such loans are usually not automated at many banks, but are closely scrutinized by employees. Depending on the amount of the loan must be obtained in part by the clerk first an approval for disbursement by the supervisor.
Required documentation for approval
While an electronic look at the account and a query of the applicant's credit score are often sufficient for small loans, banks request more documents for verification in the case of larger sums (for more on this, see our detailed article). These generally include:
- The last three pay slips.
- Confirmation of a permanent employment relationship.
- Bank statements for the last 6-8 weeks.
- Budget calculation with all regular income and expenses.
These documents usually have to be sent to the bank by mail or e-mail and checked by an employee there. Because this manual review takes time and delays can also occur in the mail, it takes a correspondingly longer time to get approved.
The bank's approval process
There are different providers on the credit market. Essentially, a distinction can be made between:
- Branch banks
- Direct banks
- Credit brokers
All of these companies have partially different processes for approving loans. In this age of digitalization, some branch banks have already expanded their online offerings to include loan applications, but a face-to-face visit to the bank is often still required. This is especially true when larger sums of money are involved. This process is correspondingly time-consuming. When applying for a loan at a branch bank, you should always bring all the necessary documents with you to avoid further delays. In most cases, the application for a loan at your own bank can go faster, because they already have insight into your previous financial history.
Direct banks do not have their own branches and offer their services exclusively online. Accordingly, the application process for a loan can also be completed quickly on the Internet. When applying for an online loan, identification of the applicant is also always required to prevent money laundering. With modern providers, this can nowadays also be done online via video identification procedure. Small loans that are subject to an automatic approval process can thus be disbursed within a few hours. If the application is checked manually, it usually takes 1-2 bank working days until approval is granted. If the Video-Ident procedure is not offered, the Post-Ident procedure has to be used, which can take an additional couple of days.
Credit brokers do not decide themselves on the approval of loans. As the name suggests, they only broker loans from banks to customers. The fact that another party is involved in the process can also extend the time until the actual approval of the loan by the bank. But not with the loan comparison from us! With the free loan application, you enter your data only once and can request your individual conditions directly from several banks. By entering your data online, these can also be immediately transmitted to the respective bank. The application section is designed to be user-friendly so that you can enter all important information. If you have forgotten something, you will be informed of this during the application process and can correct this immediately. This means that nothing stands in the way of a quick, sometimes even immediate (keyword digital loan), loan disbursement.
What is the general procedure of a credit application?
Although individual banks have different processes for approving installment loans, the process is very similar in general terms. For the bank, the highest priority is to avoid a payment default. Therefore, the higher the loan amount, the more stringently the borrower's details are checked. Basically, this is done according to the following steps:
- Assessment of creditworthiness
A person's credit rating indicates how creditworthy he or she is. In most cases, a Schufa query is carried out by the banks for this purpose. However, there are also other credit bureaus that can be considered for creditworthiness inquiries. If the credit score is too bad, the application for a loan is rejected immediately.
- Examination of the household accounts
Particularly in the case of large loan amounts, information about regular income and expenses must be provided. This serves the bank to assess whether the applicant can really afford the loan installment. In order to prove the information provided, the bank statements of the last 6-8 weeks are usually requested. Thanks to modern technology, some banks do without them, provided that the applicant allows the bank an electronic view of the own current account in online banking.
- Legitimization of the applicant
In order to prevent money laundering and fraud, every applicant for a personal loan must identify him/herself. At a branch appointment, the identification is carried out by the bank employee. If the application is made online, the mail or video identification process can be used, depending on the provider.
- Approval and disbursement
Once all checks have been successfully completed, the credit application can be approved and is forwarded to the appropriate disbursement office within the bank. As a rule, it therefore takes 4-5 days before the requested money lands on one's account.
Tips on how to speed up the approval process
As an applicant for a loan, you are basically "at the mercy" of the processes within the bank and can therefore exert little influence on the processing time. Nevertheless, you yourself can ensure that there are no further unnecessary delays. The following tips will help:
- Provide correct information
Especially in the online loan application, the data is entered by the applicant itself. Here it is important that these are all correct. If it is discovered during the subsequent check that incorrect information has been provided, the bank will make unnecessary queries or reject the application directly. For more on this, read our tips on "what can you do if the loan is rejected?"
- The right time to apply
Only bank working days are counted for the duration of loan approvals. These are from Monday to Friday. Anyone who submits a loan application on Friday evening must expect that it will not be processed until Monday morning at the earliest. The same applies during holidays or in case of bank strikes.
- Submit complete documentation
If you apply for a loan and have to submit documents for it, they should be correct and complete from the very beginning. Here, too, the following applies: If documents are missing or incomplete, there will be queries on the part of the bank. This leads to unnecessary delays. If you make the application directly in a branch, the necessary documents should already be taken with you.
How quickly a loan is approved depends on several factors. As a rule, small loans or. Instant loans approved very quickly; for larger loan amounts (e. B. for a debt rescheduling loan) logically a more elaborate check is required, which costs time. If you already have a long-standing relationship with your own bank, loan approval can be very quick here as well. Online and direct banks also offer greatly accelerated application processes for loans thanks to digitalization.