Issuing a loan is one of the fastest and most convenient ways to make a large purchase. Especially if it is quite problematic to accumulate your own funds for its acquisition. Therefore, it seems quite logical that the number of potential customers of banks is not decreasing, despite the crisis in the economy.
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It is obvious that any borrower, when applying to a credit institution, wonders how to increase the chance of approval of the application? On the one hand, the criteria that influence the bank’s decision-making are quite transparent and well-known. However, it is not always possible to meet the requirements of a financial institution. The logical consequence of this is a serious probability of refusal to issue a loan, the rate of which has increased recently, which is associated with some tightening of loan terms.
How do banks process loan applications?
The bank considers the application received from a potential borrower in several stages:
- first, the data provided in the application is checked;
- then the security service of the credit institution is connected to the process, collecting data about the applicant;
- then there is an assessment of its solvency;
- after that, the credit risks arising from the approval of the loan are assessed.
In most cases, the bank applies well-established and formal criteria that are determined by each credit institution individually. However, the process of reviewing the client’s application is based on approximately the same principles, which allows us to formulate several rules that increase the likelihood of transaction approval.
Factors that increase the likelihood of approval
In order to increase the chance of obtaining a loan, it is necessary:
- have a perfect credit history;
- to prove your solvency and the presence of a permanent source of income, and preferably several;
- issue collateral for the loan in the form of liquid collateral or several surety agreements. If this term is met, the bank can issue a loan even with a bad credit history;
- have official employment, have property and a stable marital status.
Quite often, in order to increase the chance of taking out a loan, the client makes several online applications to various banks at once. Existing services today allow you to carry out this operation without problems, making the probability of loan approval much higher.
Factors negatively affecting the application
Today, the main factor that can lead to the rejection of even a small consumer loan is a client with a problematic credit history. To further aggravate the situation, reducing the chances of approval of the transaction to almost zero, the overdue debt to any financial structures existing at the time of filing the application. It is quite problematic to count on a positive solution in such a situation.
Other negative factors may be:
- provision of incorrect information in the loan application;
- the presence of a large financial burden in the form of outstanding loans;
- low level of income or irregular receipt;
- lack of collateral for the loan;
- short work experience at the place of the last employment, etc.
How to increase the chances of approval
The process of issuing a loan should be approached extremely seriously. This is due to the fact that even such minor nuances as, for example, the appearance of the applicant during a personal visit to the branch, the manner of conducting a conversation with an employee of a financial institution and other similar trifles can increase the probability of transaction approval.
Quite often, a properly structured dialogue with an employee of the bank’s credit department can lead to the fact that he will prompt the most important points that are considered by the bank in the first place, or even help to correctly issue an application. In some situations, it is advisable to attract a credit broker, whose labor costs will more than pay off with a positive end result.
How long are applications processed?
The time of the bank’s reviewing of the loan application depends on several factors:
- the requested loan amount. It is obvious that the verification of the client when issuing a mortgage will be carried out much more carefully and longer than when applying for a consumer loan, for example, for the purchase of a phone;
- credit history parameters. Having a positive history of relationships with banks significantly simplifies the procedure for checking and approving the transaction;
- availability of loans in this bank. If the borrower is already a client of this financial institution, the approval process of his application may take only a few minutes.
Given the above factors, it becomes clear why banks consider some applications within 5-10 minutes, while it takes 2-3 working days, and sometimes more than a week, to make a decision on other requests.
Tags: finance, financial reports, loan