Loan Application Process from the Lender’s Perspective

So you have applied for a loan and now you’re thinking, “what happens now?” You may be wondering what processes take place behind the scenes with the lender to decide whether or not to approve your application. What are the key factors that will boost the chance of having your loan approved? From a lender’s perspective, here is a glimpse of the processes done after your loan application has been received.

Step 1: Eligibility Check

One of the first things that lenders do when you have applied for a loan is to check if you are an eligible customer. This means that lenders will verify the information you provided them such as your current employment status, assets and liabilities, and residence status.

Step 2: Know the score

After verifying your eligibility as a customer, most lenders will determine your credit score. According to Investopedia, a credit score is a statistically derived numeric expression of your creditworthiness used by lenders to access the likelihood that you will repay your debts. This enables the lenders to measure the risk of lending money to you.

Step 3: Initial Decision

After considering all the information pertaining to your application, the lender then needs to decide whether to refer or to decline. Getting a ‘Refer’ verdict means that your loan application is close to being approved but there are conditions or more information that may be needed to get that approval. You may be required to provide extra documentations and information, such as ID’s, payslips, etc., or to offer  security for the loan. It is also possible that the lender may decide to lend you an amount less than what you have asked for.

Step 4: Final Answer

After submitting the requirements for the conditional approval, a final decision will be made by the lender: whether to give a final unconditional approval or to decline the application. Getting an unconditional approval means that your loan is now fully approved and you are not required to submit further requirements and conditions. For approved application, you will receive loan documents with an offer of the approved loan amount and the interest rate.

Step 5: Settlement or Decline

Once you receive the offer from the lender, you have the opportunity to choose whether to accept it or to decline the offer.

Useful Tips!

  • To get a better chance of having an approved loan application, it is advisable to offer a valuable asset such as a car or a property as a security to the loan.
  • Check and manage your credit file by accessing your credit score and take action on any defaults or late payments or other problems from your credit file.
  • Ask professional and expert advice from a financial advisor or a mortgage broker regarding your concerns and questions on your credit file.

Want to know strategies to help boost the chance of having your loan application approved?

Talk to us and we will be happy to assist you with our expert advice!

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–Dalai Lama

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