Underwriting ExplainedWhen we talk about underwriting, we are referring to the process a lender or finance provider takes when assessing who qualifies for a loan. A person who is by profession an underwriter could be an individual or alternatively, it could be a team of people who carry out the underwriting. Underwriters base their decisions on a series of checks using behavioural and statistical analysis in order to find out which applicants are best suited to their particular product and who they believe will be likely to meet the requirements for repayments. Lenders will have different criteria which will be based on the product they are offering in addition to their own procedures and fee structure. For the sake of the ease and the reader, in this guide, we will be looking at an overview of the practices which are carried out universally in the United Kingdom. The underwriting process in its entirety is essentially a mixture of automatic and manual processes which helps to pick out the strongest candidates in a sea of many applications sent in for review. The process for acceptance for a loan is normally referred to as a funnel in which most the applications come into the system and through all the different checks are narrowed down until the small end of the funnel where only the successful and strongest minority come out the other end.
The Initial ApplicationThe initial application for a loan is relatively simple. Applicants are asked to fill inn their basic details on a paper form or on an online form. This will usually take a few minutes to complete so it is very easy to do. The application will ask you questions about yourself such as:
- Employment Status
- Monthly Income
- Home Owner vs Tenant
- Whether you receive any benefits
- Bank Details