How Loan Decisions are Made

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: