The Checks Completed for Short Term Loans

In recent times the application process for short term loans has become more detailed and in-depth. This means lenders are taking extra measures to ensure the loans which are being granted are fit for the intended purpose. Although short term loans have always been known for their quick access and easy application process, the years in which the market has been in operation has shown changes needed to be made. So although nowadays the process of applying from a customer’s prospective is still straight forward and relatively quick, the lenders have a new range of checks which are taking place behind the scenes, so to speak. These checks are going a long way to ensure consumers are being offered lending resources which are suitable and therefore repayments which are a realistic reflection of their requirements. Today we will be reviewing these practices in a little more detail in an effort to better understand how a short term loan is processed.

All short term loans now require a level of credit checking in the vast majority of cases. This means the applicant will be subject to a review of one or more credit files in order to progress their application. Lenders will use a variety of sources in an effort to understand two factors. The first of which is the applicants previous history of repayment. This could be anything from a current account through to previous monthly loan repayments. This previous history is important as it provides an idea into how the applicant has behaved with credit commitments in the past. The second point of this check is to understand in better detail what active credit commitments the customer already has. This could be anything from other short term loans through to car finance or traditional bank loans.

The second element which now appears in the vast majority of short term loan application processes is budget based information. This means as part of the online application form the applicant is asked to provide honest and accurate monthly budget information compared to their monthly wage. This information is often broken down into sections, such as rent and living expenses as well as a section to detail other existing credit commitments. Lenders will then use this information alongside the applicant’s credit reference file and other elements of the application to better understand if the customer truly has the ability to repay the loan for which they have applied for.

Other more manual checks which are likely to take place with these sort of short term loans include employment validation and duplication checks. For employment checks this means the lender will make active efforts to ensure at the point of considering the loan that the applicant is employed as they have stated. This of course is very important in ensuring the customer has the basic means to support the proposed loan. The other manual check, which is likely to take place before approving the loan, is a check to ensure the customer and their details is not linked to other accounts known by the lender in any way; which may be of negative consequence to the present application.