What Besides My Credit Score Goes Into My Loan Decision

Every lending company has it’s own set of underwriting, or decision-making guidelines.  They use them to either decline or approve an applicant’s loan, and they frequently change.  Most lending companies that make personal loans borrow the money they use to fund their loans from large institutional investors who set covenants, or requirements the lending companies have to follow when making loans with their money.  

Personal Loans with Bad Credit

These are known as external factors, and they can include many different requirements.  Nearly every personal loan company is subjected to them and has to respond to them.

A few of the most common external factors beyond credit score are: employment history.  This may simply require an applicant to have been employed by their current employer for a minimum amount of time.  And if they are self-employed, to have a worked in their industry for a minimum amount of time.  Most Lenders give special considerations or make exceptions for professionals when they don’t meet the minimum employment requirements if they work in high-demand fields, like the medical field.

The loan applicants’ annual income is another common external factor the lending companies have to consider.  Their requirements usually include a maximum debt-to-income ratio.  It’s a calculation used to estimate the borrower’s ability to make his or her monthly payments based on how much monthly debt they carry in relation to their monthly income.

Anyone with a strained financial situation who is considering a personal loan should survey the lending companies’ external factors to better consider the possible consequences for waiting to apply for a personal loan.