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What Do Lenders Look For When Choosing To Approve Your Credit Application?

You don't need to be a financial adviser to answer the question of what do lenders look for in a borrower. You just need to ask what would you want to know if someone asked to borrow money from you.

What do lenders look for overall?

You would need to know whether they are able to repay you, when they can repay you, whether they have any intention of repaying you, and what you could do if they couldn't or wouldn't repay you. It's the same with professional lenders. Although lenders may have slightly different criteria when assessing the suitability of a potential borrower, and may weight certain aspects a little differently, their main concern is that they will get their money back from you.

Are you likely to repay the loan?

This is the starter question in what do lenders look for. You may have a great income and pots of money to repay the loan, but if your past credit history suggests you renege on your debts or pay them late, then very few lenders will look favourably on you unless they are able to secure their loan against a major asset that you own. This is why lenders check your credit file. They need to see your credit history, and how you have handled any credit in the past.

Are you able to repay the loan?

Question number two in what do lenders look for is the question of your income. Lenders need to see that you have a regular income so that your repayments can be easily covered. They will ideally like to see a certain period of time in your current employment, and some idea of your past employment history to ascertain whether you are the type of person who regularly finds themselves out of work. Job security and continuity is important for lenders.

When will you repay the loan?

This is usually decided by the borrower according to their existing monthly income and expenditure, and loan periods can be from months to many years, as in the case of mortgages. If everything else stacks up okay, then lenders will not take issue with the borrower's choice of repayment period unless they deem the monthly repayment amounts to be stretching the borrower's monthly finances.

Does repayment of the loan need to be guaranteed?

This is a crucial issue in what do lenders look for, and it can have far-reaching consequences for the borrower if repayments do not go according to plan. Everyone knows that a mortgage is secured on the property, and that is perfectly reasonable and expected. But how would you feel about securing your house against a business loan, or using it as collateral against a debt consolidation loan? If your credit history is good and your income fully supports your loan, then your loan may well be unsecured, but if your only option is a loan secured against a major asset, then you will need to look very carefully at the credentials of the company offering the loan, and especially their interest rate and Terms & Conditions.

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