Unlike finance companies and other types of lenders, not everyone qualifies for a bank loan. A select few may make loans to those who do not have good credit, but in most cases, bank loans are reserved for those with good credit.
The rates for bank loans are directly tied to the credit history of the applicable, and as such, only those who meet the criteria will be accepted – at least for an unsecured loan. Those who do not quite meet the qualifications may be asked for collateral or a co-signor.
Initial qualifying factors
Different criteria exists for a bank loan that most other loans. In general, bank loans are reserved for those who have a stable credit history, although this may be overlooked if there is sufficient collateral to bank the loan or the applicant has a co-signor who has strong credit.
This does not mean that only those with good credit will get a bank loan, but it does mean that they are more likely to be approved. Other factors will also be considered such as time at the current address, time on the job, income, and whether the borrower returns, owners, or lives with relatives.
If the applicant has recently started a new job due to recent college graduation or to improve himself, these factors will be weighed against the borrower's complete financial picture in order to determine whether there is an opportunity for them to grant the requested funds.
The loan process
After the initial qualifying process has been completed, the process of determining if the bank loan is going to be approved will begin. If the applicant has not already filled out the loan application, it will be completed during this phase.
After the application has been completed, a credit history will be secured if it was not done as part of the initial qualifying phase in addition to verifying address, and possibly verifying employment and income information. Any of these steps may be eliminated at the lender's discretion if the applicant provides proper documentation. In all cases, the bank will secure a credit history. If the loan request is for a large amount, collateral may be requested regardless of credit strength.
After the bank officer has completed his investigation of the application and has determined that he wishes to approve the loan. This stage of the process will require the applicant to come in to sign the contract and receive the funds for the bank loan. If the loan was initiated online, this process may be completed by way of fax, email, or postal mail.
This stage of the process will also involve a discussion concerning the loan proceeds, terms of repayment, and provisions of colonial if applicable. This is the time that the applicable wants to be certain that the contract includes everything that he is expecting – payment term, interest rate, insurance if applicable, and monthly payments. Once the contract has been signed and the loan proceeded distributed, the applicant is bound to its terms.