How do banks consider loan applications?

In order to approve a loan, a number of criteria need to be met by the applicant. Have you thought about how it is possible that a bank will not approve a request that looks good, but will approve a loan to an applicant that you yourself would not borrow at all?

Banks are considering your loan application in different ways from different perspectives

Banks are considering your loan application in different ways from different perspectives

With the experience of assessing more than ten thousand loan applications, we can say that the aspects are really specific. For purpose-free loans, banks take care of who can get a loan.

We will now look at what financial institutions are investigating when a natural person submits a loan application.

The first thing they examine is the type and amount of monthly income

The first thing they examine is the type and amount of monthly income

It is understandable that this figure will clearly show us whether or not the applicant has to repay the loan.

Of course, income is not a guarantee that the applicant will return the loan, but there are a few circumstances that will help the application not be approved:

  • Applicant is on probation
  • the receipt is not on the applicant’s own account
  • the employment contract is for a fixed period.

If the applicant has a low income, this does not mean that he or she has refused the request. In that case, he may offer him a lower amount than he requested. The main goal of the financial institution is to return the borrowed money to the client.

So for consumer credit, they focus on whether the applicant is a good debtor.

In the circumstances mentioned, it is almost clear that the application will be rejected. If the applicant is on probation, it may be released before the end. If money doesn’t come to the applicant’s personal account, he probably has illegal work.

If the applicant can prove that he has already extended his contract of employment for a limited period of time, he may receive the loan. Anyway, the bank will decide.

Can a business owner get a loan?

Can a business owner get a loan?

It is important for the bank that the applicant prove that he / she will have sufficient income each month to pay the monthly installment. Therefore, a novice trader will not have a chance, just like an applicant who is on probation. If he has been a successful entrepreneur for several years, he can get the loan.

The second important aspect is that the applicant is not registered in the debtors register

Nearly every financial institution rejects a loan application from people who are registered in the debtors register. There are several non-bank providers who approve a loan application, but of course, at a higher price. This means that either at a higher interest rate or will ask for the addition of a co-debtor.

The third important factor in the approval process is the age of the applicant

Most financial institutions will also approve young people who are at least 18 years old. But there are also those that do not give a loan to applicants who are under 21 years old.

It is not easy for older people either, because in most cases banks will set an age limit of around 72 years.

The fourth thing banks are examining is the total amount of pre-existing loans of the applicant

If the applicant already has a loan in another financial institution, it is unlikely that the bank will approve the second loan, since the client has not paid the first one either. It is different if we apply for a consolidation loan and ask for an extra amount in addition to the consolidated amount.

The fifth aspect is the social background

For each loan application, financial institutions examine the applicant’s social characteristics:

  • Whether it has a registered address
  • in which company it works
  • if they are applying for a mortgage, they are examining the characteristics of the offered financial guarantee.

It is important to realize that banks do not distribute their own funds but the resources of their clients. And from their realized interest they will pay them their profits.

Therefore, it is very important that banks approve requests carefully, be sure that the applicant will return the borrowed money to them.

If you believe that you meet the criteria above, by comparing our online loan offers on our site, you can find out in a matter of seconds which financial institution offers the best conditions to fund your needs or dreams.

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