Will I need a Credit Assessment for a Quick Loan?

Financial institutions have eased the lives of individuals in many ways. Today, you can apply for loans and approved within a very limited period. The fact that you can easily qualify for a loan is beneficial in several ways. For instance, you can provide for all your business needs even as you await the payment of your invoices. Besides, any business emergency can be covered with ease. Sometimes the repair of equipment may demand a lot of money such that using the operating cash in the business becomes compromise the operations of your business.

Away from business matters, a quick loan can help you cover various needs you may have not planned for. For example, you may have to repair or replace a very important home appliance before your paycheck. What if a medical emergency? Financing a medical cost can be very critical, especially in times of emergency. What if you need to take advantage of a certain opportunity that can actually earn you a lot of money in the future? The point here is, loans have become essential aspects, not only in financial terms but in the entire life of a person. What if you fail to qualify for a loan when you really need it? We do not want this happen to anyone. That is why we are discussing the basic things lenders look for in making lending decisions. Will I Need a Credit Assessment for a Quick Loan? Pay undivided nation to this discussion and get the answer to this question.

The Basic Determinants

Some so many people would like to apply for loans. Lenders would also wish to lend to as many as they can. However, not all loan applications will be accepted. Since money lending institutions want to profit, there are basic guidelines they must follow when making lending decisions. Each institution has basic terms and conditions that guide its operations. When lenders, such as AI Credit, approve loan applications, they are always more confident that borrowers will not only pay the sum borrowed but also the interest amount. This exactly why credit assessment is important.

Credit Assessment Evaluation

This refers to the evaluation of the risks related to loan repayment as well as the creditworthiness of potential borrowers. While clients may feel borrowers may feel their credit requirements is not known to the lenders, lenders may have dealt with many clients who ended up defaulting and would like to follow strict lending policy. The lenders desire to lend to the right borrowers, something they can achieve through a proper credit assessment. The following are the basic parameters used in credit assessment:

The ability to Repay – This is the most important aspect of the credit assessment. The capacity to repay the loan is determined using the bank statements of the applicant. The statements need to reflect the following:

  • Cash Flow
  • Repayment time for Outstanding Loans
  • Cash Deposits
  • Minimum Balances
  • Returned Cheques
  • The chances of effective repayment of the Loan

Capital – This is the amount you have individually invested in the supposed personal expenses and indicates the risk level on the other party. This information can be obtained from the applicants’ bank statements.

Character – This is arrived at following the analysis of the documents. Basically, it is the opinion formed on whether you are trustworthy or not.

Credit Reports – Your credit score along with the underlying history is among the most important aspects of your financial life. Credit history refers to a detailed report regarding your credit information. The information involves your current credit, the outstanding balances, personal details, delinquent payments and inquiries among others.

A) A credit score is simply a figure computed based on the details on your credit information and indicates your level of creditworthiness. Generally, the score should range between 300 and 850.

B) Having a low credit score means your creditworthiness is questionable. Lenders will find it difficult to lend to you. If your application is approved, you may be charged very high-interest rates. On the other hand, a high score means you pose fewer risks and lenders will be willing to offer you loans with better terms. Basically, a credit score reflects not only your credibility as a borrower but also your eligibility for attractive rates. It has effects even other important things such as employment chances and insurance rates.

C) It’s important to build your credit. This means you should have a good report. To have a good score, make sure you make payments within the required time. Lenders often report repayments. Early payments will positively affect your score while a late payment will significantly damage it. Important to note, poor repayment record is not the only factor that contributes to a poor score. One can have a bad score simply because he has never borrowed.

Credit Appraisal – The credit officer examines the documents presented by the borrower using the aforementioned parameters and generates the overall score.

If the overall rating shows an endorsement, it will be referred back to the applicant for acceptance. If the rating demands a review, the appraisal would be forwarded to the Chief Risk Officer for review before the verdict is given. In case the score is negative, the application cannot be accepted. And now back to the question we asked at the outset – Will you need a Credit Assessment for a Quick Loan? From the discussion we’ve had, which conclusion can you make? The answer to this question is yes! A good lender will not compromise this requirement while making lending decisions. Nevertheless, there is a lot of competition out there and in an attempt to attract and retain clients, some lenders may not carry out this process.

The Bottom Line

Credit assessment is a vital process lender use to evaluate the creditworthiness of loan applicants. It may be calculated on three bases, good, fair or requires improvements. A good score means you stand high chances of qualifying for the loan at better rates. In case your score is fair, you still qualify for a loan but not at the best rates out there. If there is a need for improvements, your chances of qualifying the loan are limited. Will you need credit assessment for a quick loan? Yes! Credit assessment is a very important thing that lenders cannot neglect if indeed they care for their businesses.