Here’s How the Loan Origination Process Works
If you’re new to the whole home loan, car loan, or just the loan process in general, the entire experience can seem very intimidating. After all, loans affect your credit worthiness and can either make or break your financial future. That’s why it’s so important to understand not only how a loan will work (interest rate, maturity, etc.) but also how the process of getting a loan works. This process is known as loan origination. Loan origination begins the second you put in your application and ends with approval or denial. Here’s the loan origination process step-by-step.
Step 1: Getting the Application
The first step in loan origination is to find the right loan and therefore, loan application, for you. The loan origination arguably does begin when the borrower begins looking for a loan, however, most bankers and industry professionals would say that it begins with selecting the right application. If you have a great credit score, you’ll typically have access to a wide variety of very attractive loans. However, if you’re credit score is less than perfect, your options are greatly reduced. It’s up to you to determine which loan fits you best and will likely result in approval.
Step 2: Filling Out the Application
Once you decided which bank or financial institution from which you hope to get a loan, its time to begin the application. Very few banks allow you to fill out loan applications online while other financial institutions of lenders have online applications. Always make sure the site is secure featuring not only HTTPS but also SSL. Applications usually require additional documents. You’ll be required to submit all of your personal information as well as your social security number and financial information.
Step 3: Submitting the Application
This part is fairly easy. All you have to do is make sure you have the proper documents ready and the information is correct. Then you submit.
Step 4: Approval or Denial
Once you’ve submitted your application, there’s pretty much nothing you can do. It’s up to the bank and the bank’s computers to decide whether or not you’ll get the loan. Big banks use not only its employees but also computers with complex algorithms that parse through your credit score, debt history, income, current debt, and various other factors. If the banker and computer find what they’re looking for, you’ll get approved. If something’s missing, you’ll get denied.
Step 5: Lots of Money or No Money at All
Now it’s time to either celebrate or go back to the drawing board. However, keep in mind that even though you might have been approved, it’s not up to you to pay that loan off. That’s where this process concludes and the next stressful process begins.