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How Loan Decisions are Made

Written by: John Mussi

If you've ever wondered exactly what the process by which loan decisions are made is, it is actually much simpler than you might expect.

While there are some large corporate banks that can have loan committees made up of a fairly large group of people, many smaller banks and lending companies leave the decision up to a much smaller number of individuals and in some cases the decisions can be made by 1 or 2 people.

Even with the larger corporate banks that have large loan committees, the general process of making the loan decision is still relatively simple and follows the example of the smaller banks and lending companies fairly well.

Loan Application

Obviously, the first step in the loan process lies with the loan application itself. It is possible to sabotage your loan this early in the process... since you're borrowing money from a bank or other business, it's important to make sure that you read the entire loan application carefully before you start filling out any of the paperwork.

Mistakes or areas that are incorrectly filled out can not only lead to additional days or weeks before a decision is made, but in some cases it can even lead to you being denied the loan that you want because you didn't take your time with the application.

Some lenders have employees who assist you with filling out the loan application, so the potential problem of incorrect information on the application is reduced to a minimum.

Loan Officer

In many banks and lending institutions, the loan officer exists to assist you with your application and to make sure that all information needed for the loan decision is present and included with the loan package.

Smaller businesses and banks may even have the loan officer working as one of the major contributors in the loan decision... some automotive title finance businesses even have the loan officer simply consulting a computer for loan amounts and eligibility. In some larger corporate banks, on the other hand, the loan officer may simply be the person who is stationed at the loan desk and actually has very little say in the fate of your loan application.

Loan Committee

The loan committee is the group of individuals who review your loan application as well as your credit score and collateral in order to make a final decision on the status of your loan.

The loan committee can vary in size from a few individuals who work together in the office to a larger group that might not even be located in the same area as the bank where the loan application was submitted.

The amount of time that a loan application spends with the loan committee can vary greatly... some loan decisions can be made in an afternoon whereas others may require a few days to possibly even a week or more.

The time that it takes to make a loan decision can be an inconvenience if an individual has a major need for the money, but is usually not too excessive.

Approval or Denial

As a general rule, the decision to approve or deny a loan request is final... there do exist some situations where the bank or lender will allow a decision to be appealed within a certain amount of time provided the individual requesting the appeal can show a good reason for it.

It should be remembered, however, that just because a loan application is denied it doesn't mean that you won't be able to get the loan that you want or need.

You may freely reprint this article provided the following author's biography (including the live URL link) remains intact:
About the Author

John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the www.directonlineloans.co.uk website.


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