Getting a loan is easier than many think! The reason is that net interest income is an important source of income for every bank and every financing partner. Since a loan is very easy to plan and is not subject to price or valuation risks, it is a combination of trust and future calculation.
Each lending is based on trust and future calculation
Those who want to deal with the lending process and internalize the individual steps should start with the nature of the loan. For most loans, the payment date, amount and the due date and amount of the installments are set at the time of conclusion of the contract. Essentially, the lender must be able to trust that the borrower really wants to repay the loan. Otherwise, he would have to initiate dunning procedures that are often associated with a great deal of effort.
Therefore, for most types of loans, the lender checks for repayment ability and willingness to repay. The repayment capacity is calculated as the monthly income minus the estimated or actual cost of living.
Processing the loan application therefore includes the following steps:
1. Check if there is a stable monthly income that can be used to cover monthly payments. For this reason, the bank or financing partner would like up-to-date information about the monthly income. This can be either a salary certificate from the employer, the pension notice or the tax assessment of self-employed borrowers.
2. From these figures, the bank or financing partner calculate whether the monthly disposable income after all living expenses would be sufficient to cover the new loan. If this amount is too small, a loan with a longer term or a lower loan amount can be proposed.
3. If the numbers make sense and a loan could be awarded, the lender may want to assess the risk more closely. This can be done on the basis of the job situation, such as income or length of service, but also the experience of other lenders. If the borrower has not repaid many loans on time, the new lender can certainly assume that this loan commitment could also be burdened with considerable extra work. As a result, a risk premium may be levied on normal lending rates.
Can you apply for a loan online?
The loan processing process varies depending on amount and, of course, the lending company. So there are banks that pay less attention to the creditworthiness of smaller loans, but on average calculate higher interest rates. Their risk compensation then assumes that the problem loans not only cover 1% to 2% of all commitments, as usual, but account for a larger share. The interest income then more than compensates for this problem in the context of risk diversification.
All reputable banks and financing partners charge no fees for this processing, which is why the borrower can compare calmly and obtain one or two offers. For you UK citizens, today you can get quick loans uk online.
With the introduction of online credit comparisons, loans became cheaper again
Before the introduction of online credit comparisons, retail loans were much more expensive than they are today. This is not only due to the lower capital market interest rates, but also because there is much more competition. The days are over when there were only two or three full banks in many medium-sized cities, and these almost lowered or raised lending rates in lockstep.