Is the loan application process unfamiliar to you, or have you been wondering about the ins and outs of acquiring a loan? Loan applications and the unknowns surrounding approval can be confusing. But they are relatively straightforward and more manageable once you understand them.
Following the high demand for lending in the financial markets, loans have become readily available. Additionally, they are now quite frankly relatively attainable. Thus, understanding the loan application process is crucial.
Are you looking to apply for a loan without knowing where to start? If so, you are in luck because this guide will make it easier to decipher the entire process and feel more at ease as you apply.
If you plan on borrowing a loan, researching the available lenders is always a good idea. After all, different lenders are available and offer loans under different terms.
Traditional and alternative lenders are the primary lenders in the market today. The former mainly include banks, financial institutions, and credit unions. Whereas, the latter refers to lenders that are generally governed by more relaxed regulations, like direct lenders.
Payday loans are a perfect fit for acquiring instant, emergency, and cash loans without navigating the strenuous drag of loan intermediaries.
Even though every lender has unique requirements, rules, and regulations and must-have documents and policies, they shouldn’t be an avenue for fear. thus, don't let them deter you from applying for a loan.
Whether you are applying for your loan online or using a certified financial institution, this is generally the start of the loan application process. The submission of loan documentation is necessary for the lender to determine whether you are qualified to get a loan.
Online lenders may need you to fill out an online loan form that requires you to list your background and other requirements. In contrast, financial institutions may need you to submit your loan form to their credit loan officers physically.
The documents lenders ask for vary depending on the loan you are applying for and its size. Typically, big loans require more documentation and vice versa. The most common documents lenders request include financial statements, legal entity documentation, credit release authorization, and tax returns.
As you submit your loan application documentation, ensure that you make out the terms and conditions of the specific loan you are acquiring because it is a contract.
Once you provide the necessary documentation, loan underwriting is the next step. It is a deeper scrutiny of your financial capacity and even personality for a lender to verify whether you are eligible for the specific loan amount and can repay.
The lender assigns the task to an analyst who focuses on your ability to pay back the loan amount. The evaluation uses one or more of the five credit C’s- capital, character, conditions, collateral, and capacity.
You can be evaluated on your credit score, earnings/cash flows, and past loan repayment history. Industrial and overall economic conditions are also considered.
If the lender notices false information or some irregularities in your loan application, the loan application process will certainly not go further. The lender is obligated to determine your credit report or financial history. They must also consider the amount of capital, whether liquid or fixed, and your earning potential.
The underwriting process predetermines this stage. If the underwriting process is cleared, you can get your loan processed.
The loan approval step typically depends on the waiting period of the lending organization. Simply wait as the loan application is taken through the proper channels. It may take a duration of minutes to hours or even weeks in order to authorize the loan agreement fully.
Sometimes, you might find that the lender rejects your loan. You are at liberty to find out the reason for that. Financial law demands that lenders provide an explanation for such occurrences regardless of approval or rejection. The lender must send a notification in written form stipulating the status of the loan application form within a period of 30 days.
The closing stage is generally the final stage of a loan application. Once you reach this point, your application is under consideration. Thus, is going through for approval. At closing, you may be given a form to fill out and sign. Then the funds are disbursed.
The loan application process calls for commitment and communication between a borrower and a lender. Therefore, both parties must have proper illumination of what happens during the entire process. It is even more crucial for you as a borrower to understand how the process comes to fruition.
Hopefully, this article has shed light on what you need to know and familiarize yourself with to prepare for any application. Thereby, minimizing disapproval(s), and allowing you to obtain a successful loan package.
