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How to Become a Loan Officer

Updated on July 6, 2022
Chuck profile image

Now retired I have had a long and varied career a number of different career areas as well as interacting with people in many career areas

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, knowing and understanding the lender's current lending guidelines and interest rates, 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 often not a requirement for products like credit cards and car loans. A college education can help one advance more quickly in the field.

Experience is Critical

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.

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 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 ladder 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 as well as develop relationships with commercial clients who rely on financing for ongoing financial needs.

In the case of automobile and home loans this means working with new and used car salesmen for referrals of car buyers for auto loans and working with real estate agents for referrals of home buyers.

With commercial business loans the loan officer needs to develop relationships with businesses to be able to advise and assist the business in its ongoing funding and cash flow needs. Of course in the case of both business and individual customers also have to focus on the quality of the clients they deal with as their own employers (the institutions providing the loan funds) want to ensure that the loans they make are repaid on time.

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. Even the best borrowers can sometimes encounter financial hardship and the loan officer can sometimes be called in to help figure out how to minimize the financial loss resulting from a loan gone bad.

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 superiors) 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.

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2006 Chuck Nugent


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