Some factors bank managers consider before making loans

Some factors bank managers consider before making loans

There are many factors that can affect the granting of loans by most bank managers and some of them are listed below;

1. The type of account the customer operates: Although non-account holders receive loans, the loans are generally given more to current account holders than to those who operate savings accounts.

2. The amount included: If it is a large loan amount, the bank manager will consider whether if such amount is removed, it will not affect the financial position of the bank.

3. The client’s past financial dealings with the bank: a person with a stable past financial dealings with the bank has a better chance of getting a loan and vice versa.

4. The purpose for which the loan will be used: financially profitable projects are considered larger by bank managers to ensure that the loan will be used for projects that will bring profit so as to enable the borrower to repay borrows.

5. Collateral Offered: These collaterals which are fixed assets should be the things that the bank can sell easily and more than the value of the loan given.

6. Repayment Period: The repayment period of such a loan is very important as the bank would not want its loan to be tied up for a very long time despite the fact that it changes the interest rate on the loan.

7. Customer Reference: The reference should be a person who is well known to the bank and who will ensure that in case the borrower defaults or becomes insolvent, he will repay the loan.

8. Earning ability of the customer: The income of the person relative to the amount to be given as loan are some of the determining factors in granting and disbursing loans.

9. Sources of Repayment: Bank managers will also want to know the possible sources that a customer intending to borrow has to repay the loan.

10. Current Government Policy on Bank Lending: The Customer can fulfill all the “Conditions”, but if the government policy on lending is a restriction on credit, the Bank will not grant credit and vice versa.

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