Assessing Your Loan Risk: What Lenders See

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Posted on October 30th, 2013 in Loans by NSBblogger |

Imagine this situation: a good friend comes to you and asks if they can borrow $1,000. You don’t immediately say “yes,” but instead think, “How do I know they’ll pay it back in a timely manner?” You consider how responsible your friend is, what their spending habits are like, and you ask questions to gain more information about why they need the money and how soon they’ll be able to pay it back.

The less of a risk you appear to be, the more likely to be approved for a loan by a bank or other lender.

This is the same process banks and other lenders like Northeast Security Bank go through when you apply for a loan. They want to make sure you aren’t a risk to default and not pay them back. The approval process helps them to make better choices with who they loan money to.
But what exactly do they look at to determine your loan risk?

  • An active bank account- this shows lenders that you are both taking in and spending money and that you can manage expenses.
  • A good credit history- are you behind on payments or do you use credit wisely? Lenders like to see a blend of credit types and that you can manage your credit well.
  • Your employment situation- the longer you’ve been at a company, the more stable you are in the eyes of lenders. They want to know that you have recurring income that will continue to come in when you’re paying back your loan. A lender will also want to see pay stubs and a bank statement when you meet with them, so don’t forget to bring those.
  • Living situation- are you renting a home or do you currently have a mortgage you’re making payments on? More importantly, have you ever defaulted on mortgage payments?
  • Collateral- lenders will also want to know about any collateral you have to borrow against.

Nobody wants to be turned down for a loan. Improving the above factors and having an overall healthy financial situation is the easiest way to ensure your loan approval process goes smoothly. The loan officers at Northeast Security Bank can also help you work through the loan process to understand the ins and outs. You can get in touch with any of our lenders today by calling your local NSB branch to get started!

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