Loan officers evaluate, authorize, or recommend approval of loan applications for people and businesses.
Loan officers use a process called underwriting to assess whether applicants qualify for loans. After collecting and verifying all the required financial documents, the loan officer evaluates this information to determine the applicant’s loan needs and ability to pay back the loan. Some firms underwrite loans manually, calculating the applicant’s financial status by following a certain formula or set of guidelines. Other firms use underwriting software, which analyzes applications almost instantly. More often, firms use underwriting software to produce a recommendation, while relying on loan officers to consider any additional information to make a final decision.
The work of loan officers has sizeable customer-service and sales components. Loan officers often answer questions and guide customers through the application process. In addition, many loan officers must market the products and services of their lending institution and actively solicit new business.
The following are common types of loan officers:
Loan collection officers contact borrowers who fail to make their loan payments on time. They work with borrowers to help them find a way to keep paying off the loan. If the borrower continues to miss payments, loan officers start the process of taking away what the borrower used to secure the loan (called “collateral”)—often a home or car—and selling it to repay the loan.
Commercial loan officers specialize in loans to businesses. Businesses often use loans to buy supplies and upgrade or expand operations. Commercial loans are often larger and more complicated than other types of loans. Because companies have such complex financial situations and statements, commercial loans usually require human judgment in addition to the analysis by underwriting software. Furthermore, some commercial loans are so large that a single bank will not provide the entire amount requested. In such cases, loan officers may have to work with multiple banks to put together a package of loans.
Within these three fields, some loan officers specialize in a particular part of the loan process:
Mortgage loan officers specialize in loans used to buy real estate (property and buildings), which are called mortgage loans. Mortgage loan officers work on loans for both residential and commercial properties. Often, mortgage loan officers must seek out clients, which requires developing relationships with real estate companies and other sources that can refer prospective applicants.
Consumer loan officers specialize in loans to people. Consumers take out loans for many reasons, such as buying a car or paying for college tuition. For some simple consumer loans, the underwriting process is fully automated. However, the loan officer is still needed to guide applicants through the process and to handle cases with unusual circumstances. Some institutions—usually small banks and credit unions—do not use underwriting software and instead rely on loan officers to complete the underwriting process manually.
Loan underwriters specialize in evaluating whether a client is credit worthy. They do this by collecting, verifying, and evaluating the client’s financial information provided on their loan applications. They may use loan underwriting software, or they may perform the process manually.