Summary
Loan officers evaluate, authorize, or recommend approval of loan applications for people and businesses.
What they do
Loan officers typically do the following:
- Contact companies or people to ask if they need a loan
- Meet with loan applicants to gather personal information and answer questions
- Explain different types of loans and the terms of each type to applicants
- Obtain, verify, and analyze the applicant’s financial information, such as the credit rating and income level
- Review loan agreements to ensure that they comply with federal and state regulations
- Approve loan applications or refer them to management for a decision
Loan officers use a process called underwriting to assess whether applicants qualify for loans. After collecting and verifying all the required financial documents, the loan officer evaluates the information they obtain to determine the applicant’s need for a loan and ability to pay back the loan. Most firms use underwriting software, which produces a recommendation for the loan based on the applicant’s financial status. After the underwriting software produces a recommendation, loan officers review the output of the software and consider any additional information to make a final decision.
The work of loan officers has sizable customer-service and sales components. Loan officers often answer questions and guide customers through the application process. In addition, many loan officers must market the products and services of their lending institution and actively solicit new business.
The following are common types of loan officers:
Commercial loan officers specialize in loans to businesses, which often use the loans to buy supplies and upgrade or expand operations. Commercial loans frequently are larger and more complicated than other types of loans. Because companies have such complex financial situations and statements, commercial loans usually require human judgment in addition to the analysis by underwriting software. Furthermore, some commercial loans are so large that no single bank will provide the entire amount requested. In such cases, loan officers may have to work with multiple banks to put together a package of loans.
Consumer loan officers specialize in loans to people. Consumers take out loans for many reasons, such as buying a car or paying college tuition. For some simple consumer loans, the underwriting process is fully automated. However, the loan officer is still needed to guide applicants through the process and to handle cases with unusual circumstances. Some institutions—usually small banks and credit unions—do not use underwriting software and instead rely on loan officers to complete the underwriting process manually.
Mortgage loan officers specialize in loans used to buy real estate (property and buildings), which are called mortgage loans. Mortgage loan officers work on loans for both residential and commercial properties. Often, mortgage loan officers must seek out clients, which requires developing relationships with real estate companies and other sources that can refer prospective applicants.
Within these three fields, some loan officers specialize in a particular part of the loan process:
Loan collection officers contact borrowers who fail to make their loan payments on time. They work with borrowers to help them find a way to keep paying off the loan. If the borrower continues to miss payments, loan officers start the process of taking away what the borrower used to secure the loan (called “collateral”)—often a home or car—and selling it to repay the loan.
Loan underwriters specialize in evaluating whether a client is creditworthy. They collect, verify, and evaluate the client’s financial information provided on their loan applications and then use loan underwriting software to produce recommendations.
Work Environment
Loan officers who specialize in consumer loans usually work in offices. Mortgage and commercial loan officers often work outside the office and meet with clients at their homes or businesses.
How to become a Loan Officer
Most loan officers need a bachelor’s degree and receive on-the-job training. Mortgage loan officers must be licensed.
Loan officers typically need a bachelor’s degree, usually in a field such as business or finance. Because commercial loan officers analyze the finances of businesses applying for credit, they need to understand general business accounting, including how to read financial statements.
Some jobseekers may be able to enter the occupation without a bachelor’s degree if they have related work experience, such as experience in sales, customer service, or banking.
Once hired, loan officers usually receive some on-the-job training. This may be a combination of formal, company-sponsored training and informal training during the first few months on the job.
Mortgage loan officers must have a Mortgage Loan Originator (MLO) license. To become licensed, they must complete at least 20 hours of coursework, pass an exam, and submit to background and credit checks. Licenses must be renewed annually, and individual states may have additional requirements.
Several banking associations, including the American Bankers Association and the Mortgage Bankers Association, as well as a number of schools, offer courses, training programs, or certifications for loan officers. Although not required, certification shows dedication and expertise and thus may enhance a candidate’s employment opportunities.
Pay
The median annual wage for loan officers was $63,270 in May 2019. The median wage is the wage at which half the workers in an occupation earned more than that amount and half earned less. The lowest 10 percent earned less than $32,560, and the highest 10 percent earned more than $132,680.
Job Outlook
Employment of loan officers is projected to grow 3 percent from 2019 to 2029, about as fast as the average for all occupations.
Increased demand for loan officers is expected as both businesses and individuals seek credit to finance commercial investments and personal spending. Loan officers will be needed to evaluate the creditworthiness of applicants and to determine the likelihood that loans will be paid back in full and on time.
Similar Job Titles
Business Banking Officer, Business Loan Officer, Commercial Banker, Commercial Loan Officer, Consumer Loan Underwriter, Corporate Banking Officer, Loan Advisor, Loan Officer, Mortgage Loan Officer, Mortgage Loan Originator, Consumer Loan Officer, Loan Collection Officer
Related Occupations
Customs Broker, Tax Preparer, Insurance Sales Agent, Brokerage Clerk, Loan Interviewer and Clerk
More Information
The trade associations listed below represent organizations made up of people (members) who work and promote advancement in the field. Members are very interested in telling others about their work and about careers in those areas. As well, trade associations provide opportunities for organizational networking and learning more about the field’s trends and directions.
- American Bankers Association - This organization’s banker leaders represent financial institutions of different sizes, charters and business models from across the country. Their guidance, combined with ABA staff expertise, is essential to their effectiveness as an association of bankers, for bankers.
- Business Network International - BNI’s mission is to help members increase their business through a structured, positive and professional referral marketing program that enables them to develop long-term, meaningful relationships with quality business professionals.
- Mortgage Bankers Association - MBA is committed to providing our members with unmatched value and unparalleled benefits. MBA membership helps you expand business opportunities, strengthen company performance, manage operational risk and shape the industry.
- Risk Management Association - RMA helps its members use sound risk management principles to improve institutional performance and financial stability, and enhances the risk management competency of individuals through information, education, peer sharing, and networking.
Magazines and Publications
Video Transcript
Many people dream of buying a house... or going to college... but these plans, and many others, cost more money than most people have. That's where credit and loan counselors and officers come in -they help people find the best ways to borrow the money they need. Loan officers meet with people applying for loans. They examine applicants' financial records and determine just how much money they may be able to borrow. Some people have financial problems that can make it difficult for them to borrow using traditional options... loan counselors search for alternatives. Once they've found an appropriate loan, counselors explain what financial regulations are involved. Credit counselors help customers resolve financial issues, from creating a plan to pay off debt, to finding a financial aid program for college. Financial matters can be tedious and frustrating to handle, so a steady demeanor is helpful. This work requires the ability to listen carefully and explain complicated issues simply. Credit and loan officers and counselors work in banks, higher education, and in mortgage firms. In addition to math skills, they must be detail-oriented to accurately complete loan documents. These professionals usually have a degree in finance or economics. If you like helping people and you're good with numbers, your skills could lend themselves to a career as a credit professional.
Content retrieved from: US Bureau of Labor Statistics-OOH www.bls.gov/ooh,
CareerOneStop www.careeronestop.org, O*Net Online www.onetonline.org