Underwriting Explained

When 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 Application

The 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:

  • Age
  • Employment Status
  • Monthly Income
  • Home Owner vs Tenant
  • Whether you receive any benefits
  • Bank Details

Loan providers have to lawfully have an age minimum for the applicants which they allowed to offer a loan too. In most cases in the UK, this age is 18, however, some lenders prefer to lend to people aged 21 and upwards – perhaps because they are less of a risk. Payday bad credit does not require good credit to obtain a loan. Certain lenders may also require an applicant to be employed or self-employed in order to obtain a loan, whilst others do not. When provided with the basic details listed above, the system can then use automatic technology to separate the eligible from the unsuccessful.

Underwriting Checks

Initial checks – personal details

Once an applicant passes through the “funnel” system, initial checks are undertaken. In this stage of the process, the lender will have to essentially confirm that an applicant is who they say they are and that all their information is in fact, true. This is done through address-matching and bank-matching technology to identify an individual. If the information fails to match, that is when the application will be rejected or they will request it to be reviewed again by the applicant.

Credit checks

Lenders also need to carry out credit checks, which is probably one of the most fundamental parts of underwriting when deciding who will be receiving the loan they applied for. If the applicant has a good credit score and this has been outlined as part of the criteria, then the application will go through with ease. The loan provider will usually work with a credit reference agency such as Experian or CallCredit.


The final stage of underwriting is the decision. Typically, a more senior underwriter or member of staff will be required to underwrite the application. Someone on the team will be tasked with reviewing the information that they have received from any given individual applicant.

Provided that the applicant has confirmed all of their details and fulfils all the necessary requirements, they should receive the money they have requested in around 48 hours.

Daniel is a loans expert based in London and has been working in the payday loans industry since 2010.