Loan Underwriting Process Involve Detailed Customer Analysis

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loan underwriting process

Every financial institution follows its prescribed guidelines to perform daily functions. However, there are certain basic functions that are applicable worldwide. Here, I am talking about the loan underwriting process. Learn what documentation, projections, and few other essential elements are involved in making the seamless loan underwriting process. The process includes a detailed analysis of the customers or loan applicants to prevent fraudulent activities. 

Five Key Analysis of Loan Applications

➤Credit History

Every lender, before granting the loan, will review the credit history of the applicant. In case it’s a commercial applicant, the business balance sheet, profit, and loss statement are checked properly. The previous credit record with banks is looked at to know it’s a reliable borrower or not. 

➤ Collateral 

Generally, banks offer secured loans. Unsecured loans are granted in specific situations where the risk is low, and the amount of the loan is not considerable. The documents offered to the lender are verified by the analysts or an automated underwriting system to know the authenticity of the documents. Collateral security is used to recover the payments in case the borrower becomes insolvent. 

➤ Personal Details

Personal information is asked by the lender to the applicants at the first starting of the process. Information such as a residential address, business address, photo identity proof, etc. This information is kept confidential; however, they are verified to know that the applicant’s personal details are complete & true. 

➤Tax Details

Are you wondering why tax details are mentioned separately? Though they come under personal information. It’s because lenders take tax details very seriously. They check whether the applicants are good citizens or not. Tax details show the red flags clearly, if any. Therefore, analyzing tax information leads to the best loan origination system

➤ Joint Accounts

If an applicant holds a joint account, then the analysis is done again thoroughly. Though every previous account is monitored to know the financial wealth or financial status of the borrower. Joint accounts are given a bit more importance because the ownership here is not of a single person, and previous transactions are checked by the borrower. 

How Lenders Access the Information? 

Lenders have full access to the credit file where all the relevant information (updated) is stored. Unlike the manual loan origination process, which requires a lot of paperwork. Today’s with the help of advanced software, things have become easy. Lenders need to make many efforts as all the analysis is done by the software. Once the information is properly checked by the system, lenders have a true picture of whether to grant a loan or not. 

The software allows lenders to do smart AI uploading, which restricts lenders from storing the hard copies. It’s easy to track the information if it’s missed from the lender’s end. Even with the information more secretly, there are highly fewer chances of fraud. 

In today’s era, customers want quick results. Similarly, no financial institutions want to miss potential customers. With the help of loan origination software, quick analysis & decisions are made that save lenders as well as customers time. In a nutshell, lenders access automated information rather than paper information. 

Bottom Line

Running a financial institution involves a great risk. Granting a loan takes a lot of time, skills, & effort by the lenders. The time is consumed in the analysis phase to grant the loan to authentic borrowers. Thanks to the advanced tools that have made the loan origination process easy & safe.