Personal loans can be made to consolidate bills, purchase expensive items such as an automobile or furniture, or finance a college education. Loan officers attempt to lower their firm's risk by receiving collateral-security pledged for the payment of a loan. For example, when lending money for a college education, the bank may insist that the borrower offer his or her home as collateral. If the borrower were ever unable to repay the loan, the borrower would have to sell the home to raise the necessary money. Loans backed by collateral also are beneficial to the customer because they generally carry a lower interest rate.
Loan officers meet with customers and gather basic information about the loan request.
Often customers will not fully understand the information requested, and will call the loan officer for assistance. Once the customer completes the financial forms, the loan officer begins to process them. The loan officer reviews the completed financial forms for accuracy and thoroughness, and requests additional information if necessary. For example, the loan officer verifies that the customer has correctly identified the type and purpose of the loan. The loan officer then requests a credit report from one or more of the major credit reporting agencies.