Need a Loan?

A few ideas to facilitate the process

Think of the most painful, physical experience you could ever imagine… (Giving birth? Passing kidney stones? ) and most times, you will find that experience minor compared to making a loan application. While filling out the endless forms is a lot of work, it's not really hard. Once you understand the “new banking game”, the process becomes quite easy. The secret is to start with the end result and work your way backwards. While this may sound over simplified, most borrowers start their loan application without ever understanding where it is they are going. (I don’t mean just to get a loan!) Conversely, almost every driver knows their destination before they start their car. You would never ask someone “Tell me what I need” and then settle for “Six right turns, four left turns, and a bunch of straight-a-way”. You have to treat the borrowing process the same way. 


It really is that simple if you understand 2 significant concepts: (1.) The days of “Just write the check and come in when you can…” banking are gone (they may make great folk lore someday). (2.) Your loan officer, no matter what you think of her/him is only doing their job. They too are having to answer to much bigger bosses whom they probably don’t like much either. Their job is not to approve your loan in the fastest, easiest manner they can for you; rather it is to verify that you can do what you say AND that you can pay it back. If that sounds too easy, I’m sorry, it’s just that simple. So how do we turn this nugget of nothingness into something useful?


Let’s look at our driving example and use that as a template. Your “destination” is your loan approval. Your loan officer wants to make sure you can get there by paying your loan off as it comes due. You can either make them dig through endless, unorganized documents that you grudgingly brought in OR you can impress them by showing that you understand the process and by giving them what they need in an orderly format. Show them your cash flow, you know it better than the banker. When they “err on the side of caution”, they will probably screw it up for you. If you are not sure ask. How much cash reserves and excess cash flow for cushion are typically required by that lender? Then show them how you are going to do it. If you can’t find it in your paperwork, believe me, they can’t either. All those tax returns and financials they keep asking for are no longer file fillers. They are used by your loan officer to answer the above. If you are uncertain how to come up with these numbers, talk with your accountant or even ask your loan officer for help. It really isn’t a hide the ball situation. Banks are now having to do the job that should have been done for the last 30 years. They now have no choice and very limited discretion, so don’t think they are going to get tired and approve it anyway. On the contrary, now they will say “no” just to be safe. We all have to do this so don’t feel picked upon. Welcome to the new banking game.



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Comment by Stuart J. Brady | May 25, 2011

You are right on the money Robert!