Most banks have automated computer-based underwriting programs that can make decisions on personal loans. Since personal loans involve no collateral, the automated system makes a decision based upon the applicant's credit score and income information, as input by the loan officer. Many banks do not require loan applicants to provide income verification for loans that do not exceed $5,000 or $10,000. Credit bureaus can estimate your income level based upon your credit use, and credit bureaus can share that information with automated underwriting systems. It normally takes just seconds for the automated system to make a decision.
Human underwriters review applications that are too large or complex for the automated underwriting system. For manually underwritten loans, you normally have to submit supporting documentation such as your last 30 days of pay stubs, two years of W2s and also your tax returns. The underwriter compares your verifiable income with your debts as shown by the credit bureau and uses both sets of information to calculate your debt-to-income ratio. This review process normally takes less than an hour as long as you provide all of the information to the loan officer when you submit your application.
The underwriter of a personal loan can make one of three decisions after reviewing your application and the supporting documents. The underwriter can approve the loan, decline the loan or ask for further information. You normally receive an approval or declination within a few hours of submitting your application unless the underwriters have a heavy workload, in which case it could take a few days before anyone reviews your application. If the underwriter needs further information, that could delay the decision by a few minutes or several days.
If you do not have enough income to qualify for a loan or if you have poor credit, the underwriter may ask you to provide evidence of an additional income source or for you to explain issues on your credit report before making a final decision on the loan. Banks can make exceptions and approve loans for longtime customers who do not meet the basic requirements. However, exceptions normally require the approval of a senior underwriter and depending on that underwriter's workload, it could take a few minutes or a few days more before you hear the final verdict on your loan.