What Do Lenders Focus on When Reviewing Loan Applications

What Do Lenders Focus on When Reviewing Loan Applications

You seek financing because you need the funds. Thus, you most probably want to do everything possible to pass through your financial institution's scrutiny during the application process. However, how do you get everything right when you're unsure what the lender is looking for in your papers? This article aims at eliminating the guesswork that comes with loan processing and sheds light on what you need to include or exclude. Check the list to determine why your application failed and what you should do before applying for another loan to be ready for when bankers are reviewing loan applications. You may also talk to experts at Maxlend loans to find out your chances.

Your Credit

Almost all lenders are interested in your credit score and history. These figures indicate your commitment to clearing your bills and debts if you've filed for bankruptcy and any other pointer that may call for caution from the lender. Poor credit history will typically scare lenders, limiting your chances of landing the best loan terms. However, some lenders will consider you if you have a guarantor.

If possible, you should obtain the credit history early and go through the report to note and correct any errors before they cost you during the loan application. Again, consider the company that your potential lender uses when acquiring the information.

If you're applying for a business loan, you'll probably need to present your credit reports and that of your business. If you notice that your credit card score is poor, it's essential that you work on improving the figures first.

Your Ability to Pay the Loan

When reviewing loan applications, your lender wants to know if you can comfortably pay the monthly installments. This comes in various ways:


First, the lender will check if your monthly income is sufficient and if your job is consistent. If it's for business, your lender will probably ensure that your business's income is enough to cater for the monthly installments comfortably. To gauge all this, lenders typically consider all your assets, bank savings, monthly payment, and any other form of earnings. The more assists you have, the less risky it feels for lenders to trust you.

Debt-to-income ratio

Another significant indicator of your repayment ability is your debt-to-income ratio. This is the percentage of your monthly debt obligations against your total earnings. A rate higher than 43% will mostly scare away lenders, as that shows debts consume over 43% of your salary.

However, some lenders may consider your plea even when the percentage is higher than 43%, especially if your salary is relatively high and you have a good credit score. However, there's no guarantee for that. As a result, it's better to work on repaying your current loans and reducing the percentage first before you apply for a loan, especially if the need can wait.


Lenders want assurance that they won't lose money even if they can't make the monthly installments. As a result, a secured loan will always require you to place collateral (the property your lender can seize to recover the loan when you can't repay as agreed).

You'll need to ensure that the collateral's value matches or exceeds the amount you're taking for a loan, and it remains useful all through the term of your debt.

Any Derogative Risks

Issues that brand you as a risky borrower will typically scare lenders. These include filing for bankruptcy, any risk of account delinquency, or charge-offs. If you have any of these issues, consider solving the situation and lifting your credit scores before applying for a loan.

Lenders are interested in doing business with you, but only if you show the potential that they won't lose money when they are reviewing loan applications. As a result, you may need to clear any doubt with risks and create a trustworthy portfolio that will attract financial institutions. Similarly, develop a habit of paying all your bills and debts on time. This protects you from extra fines and charges and also increases your credit score.

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