Banking & Savings, Insights

So Close! What Does Conditionally Approved for a Loan Mean?

flik eco finance personal what does conditionally approved for a loan mean

So, let's say you're in class. It's your first day, and you have a new, smart-ass professor. They walk into the room and, with a goofy, goofy grin on their face, say, "You've all conditionally got an A!" 

If you are an idiot, you will smile and cheer. An A! 

Wait. Hang on. You missed a really important word: CONDITIONALLY. Some conditions have to be met before you get an A.

Conditionally approved for a loan — any type of loan — works just the same way. And you must understand what conditional loan approval means before you run around and start spending money or buying a sweet steering wheel cover for that brand new Camero you just got a loan conditionally approved for. 

What Does Conditionally Approved for a Loan Mean Table of Contents

What Does Conditionally Approved for a Loan Mean?

Does Conditionally Approved Mean I Got the Loan?

What Are the Steps After Conditional Approval?

What Does Conditional Approval Mean for Car Finance?

What Does Conditional Mortgage Approval Mean?

Can a Loan Be Denied After Conditional Approval?

How Long Does Conditional Approval Last?

Will a Conditional Loan Approval Impact My Credit Score & Credit History?

What Is an Unconditional Approval?

What Does Conditionally Approved for a Loan Mean?

Conditional loan approval means that you have been approved for a loan, provided you meet certain conditions. These conditions can vary wildly. 

Here's an example: Let's say you apply for a business loan and get conditionally approved. No, this does not mean you can start spending money like a drunken sailor. It does mean that you have met the conditions to get the loan. It means that, based on the information that the lender has seen, you should qualify for the loan. However, you may have to provide the lender with additional information. This information can include tax returns, pay stubs, bank statements, or more.

More often than not, the conditional approval is dependent upon you verifying that the initial information provided to the loan originator is accurate. So, as long as you aren't lying on your loan application (don't do that, it may be a crime, and it's unquestionably stupid) and can verify your income, a conditional approval usually turns into a full one. 

Does Conditionally Approved Mean I Got the Loan?

Hold your horses! When you see "conditionally approved" for a loan, it doesn't mean you've hit the jackpot just yet. But, let's not be all doom and gloom. You're closer than you were before, and the odds are tipping in your favor.

Picture conditional approval as a sort of 'maybe' in the world of loans. The lender's saying, "Hey, we like you, but there are a few hoops you need to jump through first." You need to meet certain conditions. Nail those, and the loan is all yours.

On the flip side, if you stumble and can't provide the right paperwork within the given timeframe, you might see the loan slipping away. It's like a tightrope walk – maintain your balance (aka, meet the conditions) and you're good to go. But lose your footing and... well, let's not go there.

In essence, conditional approval means you're on the right track, but it's no time to rest on your laurels. Keep your eye on the ball, meet those conditions, and then, only then, you can consider that loan as good as yours.

What Are the Steps After Conditional Approval?

The answer to this depends on the type of loan you are applying for and the specific conditions laid out.

Let's go back to that professor's example from the beginning of this article. You conditionally have an A in class! Awesome! Except for those pesky conditions. In this example, those conditions mean, you know... doing well in class. Getting good grades. Turning in your papers on time, and having those papers be of high quality.

For a loan, the same applies. You will have to fulfill whatever conditions have been laid out by the loan underwriters. More likely than not, this involves completing the necessary paperwork. It means turning over appropriate financial records, like your bank statements, tax records, proof of employment, DNA samples (not so sure about the last one), and more. 

However, the conditional approval is likely dependent upon all other aspects of the loan — and your financial situation — remaining the same. In other words: Keep your job, don't get arrested, and make sure nothing happens to the asset you are trying to borrow money to purchase, lease or rent. If any of these conditions change, you may lose the loan approval. 

What Does Conditional Approval Mean for Car Finance?

Remember, it can apply to any type of loan when it comes to what is conditionally approved for a loan. Most of the time, it only applies to larger ones. In fact, you've probably heard the term in some advertisements or in those junk mailers — if they make it for more than three seconds before you chuck them into the trash, that is.

When it comes to getting a car loan or car finance, you're in luck — conditional approval is a good thing. It means that your car loan request has been conditionally approved, and all you have to do is complete whatever paperwork requirements exist. It means you will get the loan — provided you can verify all of the things you put on your paperwork. 

Different car financing companies have different requirements to finalize any loan request. In all probability, you'll have to prove your income, and this likely means you will have to provide a copy of your last paystub. If you're getting a loan from a credit union, you may also need to prove that you are eligible to get the loan from the credit union. This may mean that you have to show proof of residence or work for a company that allows you to get a loan from the credit union in question.

Just like with any other conditional financing, you'll need to not... you know, screw up. Don't lose your job or have anything happen to you before the loan is finalized, and you're good to go. Of course, if any of the conditions related to your loan change, you may lose it. 

What Does Conditional Mortgage Approval Mean?

Conditional mortgage approval is great news. It means that the underwriter has determined that you qualify for a mortgage based on the information you put on your paperwork. WOOHOO! Celebration time!!!

Okay, so now what? 

Now, get your act together, and get the paperwork in. You'll need to submit income verification, show homeowners insurance, and maybe submit a bank statement that shows you have the money to meet any necessary down payment. If you are making a down payment with the help of a gift from someone else, you may need a letter showing such.

Keep in mind that conditional mortgage approval is different than other forms of loan pre-approval. For example, a mortgage lender may say that you are "preapproved" for a loan of up to a certain amount, but that is only based on limited information, like a credit inquiry. There are still plenty of ways that your loan can go wrong. With a conditional mortgage approval, you're in better shape: As long as you can prove that the information you put on your application was accurate, you should be able to get your mortgage. 

Can a Loan Be Denied After Conditional Approval?

Oh, yes. Very much, yes. Again, when it comes to "What does conditionally approved for a loan mean," you have to remember that these loans are not done yet. Your loan can absolutely be denied.  

Again, the keyword here is conditional. That means certain conditions have to be met for the approval to move from conditional to finalized, and if something goes wrong, you've got a problem.

So, under what circumstances can a conditional loan be denied, even after you earned conditional approval? A few:

  • You fail to provide the verification information in the time given.
  • You provide the verification information, but it doesn't do what you think it does. In other words, it actually shows that you don't meet the necessary requirements, like income.
  • Something else goes wrong that results in you failing to meet necessary underwriting requirements.
  • Something goes wrong on the lender's end. This may mean that they realize they made an error on their part and that you don't actually meet the necessary qualifications for the loan. It may also mean that THEY are having financial problems and can't afford to extend you a loan. 

How Long Does Conditional Approval Last?

This is impossible to answer completely. Just like everything else in the financial world, there can be a ton of different answers. 

Most of the time, it is a range of somewhere between 30 and 120 days. This should give you plenty of time to get together whatever paperwork you need in order to meet the conditions of the loan. Thanks to the joy that is the internet, you probably don't need a TON of time to get together a paystub. In fact, you may be able to print it right off of your HR internal website. 

Of course, if you're applying for a loan, you probably need the money... you know... now. In other words, don't screw around and do whatever you need to do to fulfill the conditions of the conditional approval and get the loan. 

Will a Conditional Loan Approval Impact My Credit Score & Credit History?


Remember, conditional loan approval comes from information already available to financial underwriters. You fill out forms and list various pieces of information. This conditional approval will not impact your credit score.

However, meeting the final conditions may impact your credit score. This is because part of the standard conditions for loans involves checking someone's credit score. A hard inquiry on your credit score will negatively impact your credit score. Fortunately, this impact is usually minor and brief, as long as you haven't had too many hard inquiries lately. Stop laughing. A "hard inquiry" is the actual term.

This probably doesn't need to be said, but the actual granting of the loan will absolutely impact your credit score. Your credit utilization (meaning your total debt load) is one of the biggest factors of a credit score, so the more debt you take out, the lower your score. The good news? Paying off the debt regularly and being on time with your payments will ultimately be a net positive for your credit score. So, pay off your debt, and you'll be good. 

What Is an Unconditional Approval?

Unconditional approval comes after conditional approval. It means you turned in all your paperwork and confirmed that everything you said is true: You really are Superman. No. Wait. It means that you actually make all the money you say you make and that the loan is yours. 

This also means that the loan amounts have been set. All that has to happen now is that the loan officer has to finalize the paperwork and put the loan into your hands — or the hands of the company managing your loan. 

Share This Article with Someone Who Has Been Slapped With a Conditional Loan Offer

One more time — a conditional approval of a loan is good! It means you are probably going to get the loan. However, the money IS NOT YOURS YET. STOP SPENDING IT. When you ask what does conditionally approved for a loan means, you still have to meet the conditions set out by the loan officer and make sure that your financial status doesn't change.  

Did your idiot best friend come to you, skipping with glee, about the loan she just got conditionally approved for? Feel like he or she needs a refresher on what that actually means? For the love of his or her bank account, send this article to them, and then take their credit cards away....


About Jermaine Hagan (The Plantsman)

Jermaine Hagan, also known as The Plantsman is the Founder of Flik Eco. Jermaine is the perfect hybrid of personal finance expert and nemophilist. On a mission to make personal finance simple and accessible, Jermaine uses his inside knowledge to help the average Joe, Kwame or Sarah to improve their lives. Before founding Flik Eco, Jermaine managed teams across several large financial companies, including Equifax, Admiral Plc, New Wave Capital & HSBC. He has been featured in several large publications including BBC, The Guardian & The Times.

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