Applying for a loan can be a stressful time, but it is extremely common and part of almost everyone’s life. At some point, whether it is to get by in hard times, or to expand a business venture, most people will go through the loan application process. This is a relatively simple process, but the details can cause stress.
When it comes time to take on a mortgage, send a child through college, or find a new vehicle, a loan application will be necessary. Lending institutions have concrete methods of providing loans to applicants who pass all manner of company qualifications.
Most banks and other financial institutions welcome loan applications as far as the federal and state laws with allow. It is the underwriting process behind the loan itself that can be difficult. Underwriting is the promissory note issued by the financial backer of the lending institution. In most cases, this is an authorization committee that is responsible for proper management of company assets and stockholder dividends.
In general, underwriting bodies of major institutions will set official protocols and guidelines for their representatives in individual company branches to evaluate and issue loan amounts. These guidelines vary from lending institution to lending institution, but are mostly governed by law.
Applying for a loan seems stressful to most people because of the personal information that is required to be submitted during the application process. The purpose of a loan application is to give the lending institution enough time to evaluate the risk they will take by underwriting a loan. Besides an interview from a medical professional, the loan application process can be the most revealing part of a person’s life.
The need for a loan is a great reason to form a solid habit of keeping personal financial records sorted and on-hand at all times. Almost every major loan will require personal financial information like borrowing history, employment and pay stub records, bank account totals, and other liabilities. Other liabilities include all outside agreements and debts. This means under-the-table work repair bills, student loans, gambling debts, and imminent obligations. The lending institution is allowed by law to examine every part of your financial life for the potential loan term before agreeing to lend.
Nothing about the loan process should be perceived as too intrusive, or discriminatory. If the lending officer is performing duties according to company procedure and prevailing law, every detail should be forfeited when required.
A great way to deal with the stress of a loan application, besides keeping detailed yearly personal finance records, is to understand that millions of people go through this process every year. Individuals are relegated to “perceived lending risk” when applying for a loan. Ideally, no one should be singled-out for approval or denial based on anything but their potential to pay back the loan. As people grow in their financial stability, increase their personal savings and other assets, and work consistently with financial institutions, the lending application process will get easier. It is worth investigating what will be required with a practice loan interview, well ahead of a formal loan application.