Lenders of personal, business, home, quick loans usually embed a custom loan application form into their websites. This helps them to streamline their workflow and save them time. Besides that, it makes it easier for them to process many loan applications. Therefore, they can easily view all submissions of information once candidates submit their applications online.
The meaning of a loan application form, what it entails, types and so on are all-inclusive in this article.
What is a loan application form?
Loan forms represent the initial stage of a much broader qualification process. Most lenders usually filter early stage candidates with the loan application forms. Besides that, they also use it to conduct background and credit checks, and also to gather supporting documents.
What does loan application form entail?
Before understanding what they use the loan application form for. It’d be cool to know what’s involved in a loan application.
There are several distinct phases of the loan application process. Lenders usually run background checks to determine the eligible candidates after receiving loan requests. So, if they pass this initial stage, they will invite the potential borrowers for further documentation. Besides that, they could invite borrowers for a face-to-face discussion.
Finally, the lender will offer (which may or may not match the loan amount the borrower needs) the loan. And this usually goes along with any associated repayment terms, interest rates, and any additional fees.
Smaller lenders who deal primarily with short-term loans, sometimes rely only on loan application forms. Even with no further stages to decide whether they should lend money to the borrowers. However, they treat bank loan applications differently.
Some advisory organizations which include government bodies and nonprofits, may use forms to help connect borrowers with lenders.
What are loan application forms used for?
Having seen what they involve in a loan application, knowing its use is important. Although they are relatively straightforward documents. They perform a wide range of informational functions. Most lenders consider them as essential business documents. This is because without them the application process wouldn’t be able to run smoothly.
You can gather the following types of information using the form:
- Personal details and contact information.
- Employment status and history.
- Current income and expenses. You could relate this to dependents, alimony, child support, etc.
- Recent tax returns.
- Liabilities, debts, and existing loans.
- Details about the type of loan a borrower needs, such as; amount, duration, joint credit requests, payment schedule, etc.
- Guarantors and financial references.
What are the different kinds of loan application forms?
There are several unique loan application forms. Although most loan application forms have a similar structure. Besides that, they could include fields for the same information-points. However, there are differences in the kinds of loans that borrowers request.
3 main types of loans and their corresponding forms
1. Micro loans
Micro loans are individual loans that are usually short-term. They typically last for several days or weeks. Most times applicants for this loan may not have a strong credit history and may even be unemployed.
2. Personal loans
These are loans lenders designed for individuals which last for longer than a micro-loan. It can last for several years. They also see mortgages or home loans as types of personal loans.
3. Business loans
Lenders can offer businesses business loans of a few hundred to several hundreds of thousands or even millions of cedis. The lenders are usually large financial institutions like banks.
Note: There are many other niche types of loans like car loans, equipment loans, student loans. However, they all usually fall into the categories above. And their application forms will take a similar format.
What are the benefits of loan application forms?
Loan application forms have some benefits. Because of this, lenders consider them as essential tools for managing the loan application process.
The following are some of their major benefits:
- They allow lenders to evaluate and filter potential clients.
- Loan application forms provide efficient means of gathering relevant applicant information and documentation.
- With these forms, it’s easier to transfer information to databases. This is because the forms follow a standardized format and they usually host them online.
- They are inexpensive to produce, distribute, and process.
- It is possible to create unique forms from a single template with little time and resources.
Note: You’ll certainly need to provide customers with loan application forms if your organization is considering offering loan services.
What should a loan application form include?
Because the content of the forms depends on the type of loans a company offers. And also how they set up their internal evaluation processes. Most forms therefore follow a structure that can be recognized and include similar fields.
6 key areas that loan application forms have include:
1. Applicant details
This section usually includes fields for the applicant’s name, address, date of birth, marital status, passport, legal identifiers, and so on.
2. Employment status and history
Lenders will usually want to ensure that applicants have long-term and stable employment. Besides that, they also want to know the solid track record of applicants’ previous job positions. They may also require the contact details of past employers.
The details about financial organizations (banks) of an applicant allows lenders to know the credit ratings of individuals. And also help them determine how likely an individual could default loan repayments.
In this section, they require applicants to state the amount and payment terms of the loan they want.
Lenders could require applicants to state their liabilities and debts.
Collateral and guarantors
Some loans would require applicants to provide guarantors or offer collateral as existing assets.
Signature fields in the loan application forms will also help lenders to prevent false statements. This is because loan application forms can be useful in a legal context.
Loan application forms help borrowers to apply for loans seamlessly. Through the loan application forms, borrowers reveal essential details about their finances to lenders. Then lenders use these details to determine whether borrowers are eligible to get the loans.
However, borrowers must ensure they repay their loans promptly in order to keep their credit score in a good condition. And also to stand a chance of getting another loan in the future.