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Factors Lenders Consider when Reviewing your Loan Application

Finally, you’ve submitted your loan application and you are waiting for a reply. Will they accept or decline your application? What factor might disqualify or qualify you? How do they decide the fate of your application?

Well, if you have submitted a forbrukslån (consumer loan) application, then the odds are those questions are ringing in your mind. It can be so unnerving while waiting for a decision on a particular credit that you are expecting.


To help you relieve some of the tension you’ve built up during this period, allow us to reveal to you what factors your potential lenders will consider as they review your loan application.

Let’s begin...

1. Credit Score

Almost everyone who wants to take a loan or has taken one knows how vital a credit score is in securing a loan. It is a factor that gives your potential creditor an insight into your credit history. From the report, they can easily determine how efficient your money management skill is. It further determines if you are credit-worthy to receive lending.

If your credit history is poor, most lenders will likely not approve your application. This is because such a history indicates potential default in the future. The credit score range is 300 – 850. If yours is higher, the more likely it is to get the loan approved.

2. Your Income

When you apply for a loan, one of the things you are expected to provide is your income. You will be required to send proof of the income. The reason for this is so that the lenders can determine how much you can comfortably pay back. Hence, in most cases, lenders will only release funds to individuals who have a sufficient and steady income.

Although the amount of money you want to borrow determines the income required; nevertheless, if your income is higher, then you are more likely to get the loan. This is because the creditor will believe that you can make the payments as at when due.

3. Your Employment History

Apart from providing proof of a sizable income, you need to also show that you have steady employment. Hence, part-time workers, self-employed folks, or newbies in careers may find it more difficult to get a loan when compared to folks who are established employees in a registered company. Therefore, if you don’t have steady employment, then you need to do better for the remaining factors.

4. Your Debt-to-Income Ratio

The debt-to-income ratio is another factor that creditors will consider. This ratio refers to your debt obligations in a month as your monthly income percentage. When creditors review this, they want a low debt-to-income ratio. Therefore, a ratio that is more than 43%, might not release funds to you.

While the above might put some brakes on your loan being granted, you need to know that even with a high debt-to-income ratio; you might still get credit provided you have a high income and a great credit. On the other hand, some creditors might choose not to approve the lending as it proves risky.

One thing you can do to improve your chances is to reduce your debt-to-income ratio to less than 43%. When you do this, you are more likely to get a loan with a high income and great credit.

5. Your Collateral’s Value

If the lending is secured, you will be required to offer collateral. The collateral will reduce the risk of the creditor in case you default. The interest rates of these loans are lower compared to unsecured ones where you don’t offer any collateral. Click here to learn more about unsecured loans.

For secured loans, your collateral’s value will determine to an extent the amount of money you can get. The reason is that the lender knows that they can get their money back by possessing the asset if you default. In most cases, the amount that can be borrowed will not exceed your collateral’s value.

6. Your Down Payment Size

Some lending cannot be accessed without a down payment. If you apply for such a loan, then one of the factors that determine if you get the credit is the down payment’s size. For example, if you want to buy a vehicle, when you pay upfront, you won’t have to borrow so much to get the car.

Sometimes, you need to pay upfront to get some loans. Nevertheless, you’ll still pay more as far as interest is concerned as the loan’s life gets extended.

7. Your Liquid Assets

Creditors prefer giving loans to individuals who have a bit of cash in either money market account, savings, or assets you can convert easily into cash. Generally, they look for other liquid assets that are more than the down payment you’ve made.

Hence, the creditor is rest assured in the event that you have a setback like a job loss, you can still make repayments until you are employed again. If you lack liquid assets, then the interest rate might be higher.

8. Terms of the Loan

The terms of the loan have an impact on the approval of your credit. It is easier for lenders to provide credit to you within a short period rather than a lengthy one. The reason behind this is that they believe that a person’s financial situation could likely change for the worse or better over a long period, let’s say 10 years. In case it is a negative change, then the lender might end up having to deal with the risk of you defaulting payments.

When you go for a shorter term, you will save money since the interest will be paid within a few years. However, the monthly payment will be much higher. Hence, you need to decide if this is the best term for you.

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Factors you should consider when sending your Loan Application

Now that we have looked at the factors lenders consider when they review your application, let us briefly discuss some factors you need to consider before sending in your application.

1. Loan Type

Before you send in your application, you should know the type of credit you want. Your choice will be determined by what you want to use the funds for. For example, if you want to buy a home, taking a mortgage loan will be the best option rather than a personal loan.

2. Interest Rates

Most lending comes with interests; therefore, find out what the interest rates are before you submit your application. If the interest rates are low, it makes it easy for you to pay up the debt. On the other hand, a high-interest rate makes it difficult for you to pay.

3. Your Credit Score

We talked about credit scores earlier. Hence, you should know what your credit score is before you apply for lending. You should also find out which kind of loans you can take and what institution will accept your application based on your score.

4. Your Financial Position

Do not apply for lending that you cannot repay or that will put a strain on your finances. It is wise to avoid large loans to protect you from large fees.

5. The Repayment Term

Find out what the loan’s repayment term is with the knowledge that the period determines the loan’s total cost. For such long loans, ensure that you make monthly repayments before the due date. This will protect you from facing any penalty charges.

6. Your Debt-to-Income Ratio

We equally mentioned this earlier. You need to keep this in mind when you want to get a loan. If your ratio is above 43% then you shouldn’t bother except your credit score and income is very high.


In the article above, we’ve been able to reveal the factors lenders consider when they review your loan application. Furthermore, we also mentioned the factors you need to consider before sending in your application.