The customer and the bank will not benefit if the repayment of a loan does not go well. The analysis of a credit application is, therefore, a crucial step. But how are your credit application and financial situation assessed? A look behind the scenes.
To protect borrowers, every bank that provides credit is legally required to obtain information about the possibilities for repaying its future customers. Subsequently, it is prohibited to grant someone a credit that a bank can already estimate that he or she cannot repay the loan. Every credit application must therefore be examined down to the last detail – especially when it comes to repayment options.
Usually, the lender will ask you to fill in a form on which different sections are discussed. In addition, a face-to-face conversation must give the lender a full picture of the applicant’s financial situation.
The three parts into which your financial situation is divided are:
- Your income: your income naturally plays a key role when it comes to assessing your repayment capacities. The bank will ask you for one or more wage sheets. It is also important that you state other income that the bank must take into account, such as rental income, child benefits, alimony, replacement income, etc.
- Your expenses: the lender must have a clear view of all your monthly fixed expenses. Think of repayments of other loans, alimony, rent, etc.
- Your socio-economic situation: it is important that the bank can estimate the stability of your situation. That is why the lender will ask you a number of questions about your family composition, about the stability of your job, and so on.
Taking out a loan is an important decision. That is why it is important that banker and customer play open cards . As an applicant, you are required by law to answer all relevant questions that your lender asks you correctly and completely. Talking about your finances may not always be comfortable, but the banker is your counselor to help you with that.
You will then also zoom in on your credit history
To this end, the bank will consult both the internal files of the bank and the Central Office for Credits to Individuals of the Bank of Daisy, in short the Central Credit Register . That is a legal obligation in Belgium. In this database you will find all loans granted to private individuals, from residential to consumer loans. The cases where there is a certain payment arrears also receive a separate mention in the so-called negative central bank. This data gives the lender an accurate picture of your loans. The bank is therefore obliged to look at your situation here too but may interpret it yourself.
Transparency is very important when applying for a loan
The lender must clearly explain the characteristics of the loan and the applicant must speak confidently about his personal situation and project.