Whether it is a business loan, home loan, personal loan, or car loan, the underwriting system is a vital aspect of the loan procedure. During the procedure of underwriting, the lender gauges the creditworthiness of the borrower and assesses no matter if the applicant is able to meet the criteria of the loan or not.
Factors affecting loan underwriting
There are some factors that surely affect loan underwriting. Below mentioned are some.
1. Credit score: This is one of the most crucial factors that do influence loan underwriting. When it comes to the credit score, it showcases your creditworthiness and explains how prudent you have been in handling and repaying the loan. A high and good credit scores like 750 and higher indicates that you are a responsible borrower and repaying is easy. As a result, it improves your creditworthiness and makes it simple for you to avail of a loan at reasonable interest rates. On the other hand, a bad credit score can turn the tables completely. Paying bills on time and serving present EMIs without default can boost your CIBIL score. Remember, as per the rules and regulations, you can take a look at the credit score for free every year.
2. Income: Just like your credit score, your monthly income also plays a very important role when it comes to the underwriting procedure. Most of the lenders set a particular amount which they normally do not lend to anybody. Now because loan repayment is one of their utmost priorities, they want to make sure that you have sufficient income that will surely help you repay the loan and serve the EMI without facing any difficulty. The underwriters also take a look at your source of income. In this situation, salaried individuals hold an edge over self employed people. The reason behind the same is their fixed amount of regular income.
3. Current debts and liabilities: Another crucial factor that affects the underwriting is your current level of liabilities and debt. In case you have too much debt and liabilities to serve, it will automatically impact the ability of loan repayment. The underwriter wants to make sure that you have sufficient money after serving all the debts and liabilities to clear your present loan. Basically, your monthly EMIs taking into account all your loans, present and past, shouldn’t be more than 30-35% of your monthly income.
The Key Takeaways
These are some of the factors you need to keep in mind when it comes to the loan underwriting procedures.
To gather more information about the loan origination software and procedure, speak to the professionals today. They have an ample amount of experience in the industry and know what their customers need. Also, they will help you understand a number of things you might be new to and the ios system is no exception.