How to Become a Loan Officer
Job Can Be Very Rewarding Financially
Loan officers are employees of financial institutions whose job it is to make loans to customers. Having a college degree does not hurt but it is generally not a requirement for the job.
What is needed is the ability to deal with customers, the ability to know the lending institution’s current lending guidelines and interest rates, know and follow the legal rules and regulations concerning lending and be able to evaluate a prospective borrower’s ability and willingness to repay the loan.
Most lenders generally require a high school education as a condition for employment. A college education is helpful and may help one to rise faster in the field but it is usually not a requirement.
Experience is what really counts in this field. Generally, a person desiring to become a loan officer will start in the customer service area of a financial institution such as bank teller, collections clerk (calling existing borrowers who are behind in their payments and getting them to bring their accounts current) or as a loan representative who helps applicants initiate applications for small loans such as personal loans and credit cards or even larger loans.
Loan representatives are generally sales people who take applications and other people or computers make the decisions as to whether or not the loan will be granted and then generate the paperwork which the loan representative will then have the borrowers sign.
The loan representative may do some preliminary screening to weed out those who obviously don’t qualify, but the real decisions are made elsewhere.
Moving up the latter in this career field, we have loan officers who specialize in auto loans, home mortgage loans and commercial business loans. These, much higher paying positions, are first and foremost, sales jobs in which the loan officer is expected to actively seek and solicit borrowers for business.
In the case of automobile and home loans this means working with new and used car salesmen for referrals of car buyers. In the case of home mortgage loans this means working with real estate agents for referrals of home buyers.
With commercial business loans this involves the loan officer developing relationships with businesses to encourage them to work with the loan officer when the business needs to borrow money.
Most loan officers in this category are either paid a salary and given a quota to meet in terms of dollar volume of new loans or are paid on commission with their pay being a percentage of the loan business they generate.
In addition to sales, the loan officer must collect and evaluate information about the borrower’s ability to repay the loan and the quality of collateral (car, home, business assets being pledged as security) and determine whether or not to make the loan.
Sometimes the loan officer is empowered to make the decision as to whether or not to make the loan (in these cases the loan officer is given authority to make loans up to a certain dollar amount without approval from others) and in other cases the loan officer has to submit loans to a loan committee for approval and be prepared to argue the case for making the loan to the committee.
If you are looking for a challenging job that involves working with and helping people as well as has the potential, at the upper end of the profession, for unlimited income then this career is for you.