The bank and its client have nothing to gain if the repayment of a loan goes wrong. Analyzing the loan application is therefore a crucial step. But from what angle are your credit applications and your financial situation analyzed? Let’s take a look behind the scenes of a loan.
For the protection of borrowers
Any bank providing loans is legally obliged to carry out prior checks on its future customers. It is then prohibited to grant credit to any person whose bank is able to estimate that they will not be able to repay the loan. Any request for credit must therefore be the subject of an investigation, more specifically concerning the possibilities of reimbursement.
A form specially designed for this purpose helps the lender to gather as much information as possible in order to distribute the applicant’s financial situation under different headings. A face to face interview will finalize the request: the lender will thus have a global picture of your financial situation.
The three headings in which your financial situation is distributed are:
- Your income. Obviously, your income plays a key role in assessing your repayment capacity. The bank will ask you for one or more salary statements. It is also important to mention your other sources of income such as rental income, family allowances, alimony, replacement income, etc.
- Your fees. The lender must have a concrete view on all of your fixed monthly expenses. Think about the repayments of your different credits, but also the daily expenses (food, rent …).
- Your socio-economic situation. It is important for the bank to assess the level of stability in your situation. Reason why the lender will ask you questions about your family situation, the stability of your work, etc.
Taking out a loan is an important decision
Which is why bankers and clients must play cards on the table. As an applicant, you are legally bound to answer all of the relevant questions posed by the lender. It’s not always comfortable to put your financial life down, but the banker is your trusted partner to get through this stage.
Then your credit history will be carefully analyzed. For this, the bank will examine your file internally, but will also question the Care Central Bank for loans to individuals, a department of the Astro Finance also called the Credit Center. It is a legal obligation in Belgium. This database groups together all loans granted to individuals, from home loans to consumer loans. Situations in which a late payment is noted are also taken up in a Negative Credit Central. This data gives the lender an accurate picture of your loans. The bank is obliged to examine your situation, but also to interpret it.
When you apply for credit, transparency is key. The lender must highlight all the features of the loan to remove all possible doubts from you and the applicant must explain his personal situation and his project with confidence.