Buying a home is a dream for many, but the complex process of home loan sometimes makes it challenging. The good news is that now Artificial Intelligence (AI) is making the whole process easier than ever. From loan approval to EMI calculation and document verification, all these processes have now become faster, smarter and more transparent.

Until now, banks usually approved loans based on documents like credit score and income proof. But with changing times, especially with the advent of fintech companies and the expansion of digital technology, the loan approval process has improved significantly. Now with the help of AI, banks and NBFCs are able to give loans to those who were earlier left out of this process like gig workers and people without a formal credit history.

Banks and fintech companies are gradually making the loan approval process easier for borrowers with the help of AI. Experts, however, feel that it might take some more time for large banks to adopt AI in the entire sector considering data privacy and other issues.

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Traditional methods still dominant, but AI is slowly catching up

Adhil Shetty, CEO of bankbazaar.com, says, “Most banks in India still use traditional methods — like credit scores and formally reported financial data. But some fintech companies have started using AI, such as video KYC and identification of fake documents. This beginning may be small, but the possibilities are huge.”

AI can play a big role in processing documents, verifying identity and simplifying the entire loan process, feels Shetty. Due to the large amount of home loans and data privacy, banks are slowly adopting this new technology, Shetty adds.

Loan amount, EMI and interest rates – now everything is more accurate

Atul Monga, CEO and co-founder of BASIC Home Loan, says that due to AI, customers are now getting instant, personalised information that helps them take better decisions.

“Earlier, there was a set list of rules for disbursing a loan. But there are a lot of nuances in a home loan — like the exact value of the property, how stable your income is, or what documents are missing. AI now takes all these factors into account and gives a more accurate estimate of EMI,” he explains.

Not only this, AI immediately alerts when interest rates fall, speeds up the process of document verification and KYC so that customers can lock in a good offer at the right time, Monga says.

“Today customers can check the status of their loan application in real time. Also, a virtual AI advisor can guide 24×7 in their language. This is very beneficial for those who live in tier-2 and tier-3 cities, where there is a lack of bank branches and advice.”

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AI is not just changing the process, but also the thinking

Kundan Shahi, Founder, ZAVO (a credit awareness and loan repayment platform), believes that AI has changed the definition of this entire process. Now the decision is not made only on the basis of bank statement or credit score. “Today AI takes into account many aspects like UPI transaction, electricity bill, rent payment. This has increased the chances of getting a loan, especially for gig workers or self-employed people,” he says.

Another advantage of AI is fraud detection. “AI now recognises patterns and quickly detects fake identities and suspicious activities. This has made banks more vigilant than before,” Shahi says.

Interest rates will now depend on your responsibility, not just the score

Shahi says that now banks can decide the interest rate by looking at the behavior and payment habits of the customers. That means even if your credit score is low, but you behave financially responsibly, you can get a better offer.

“Through a technology called Explainable AI, customers can now also be explained why the loan was passed or rejected – this increases transparency and also people’s trust.”

Considering data security, regulatory concerns and technical infrastructure preparations, it is possible that the widespread acceptance of AI in banks will come slowly. But it is certain that the picture of home loans in India is changing rapidly and AI has become the backbone of this change.