Loan officers work at credit union banks or other financial institutions to help clients apply for loans and assess their creditworthiness through a process called underwriting, in which they agree to assume the financial risk for a fee. They determine the type and amount of loan that best suits the needs of their clients.
Loan officers tend to specialize in one of three main types of loans: commercial, consumer, or mortgage. Business loans are the extension of credit to businesses. Consumer loans include personal loans, education loans, home equity loans, and auto loans. Mortgage loans include loans for the purchase of real estate by individuals? (a business would normally be serviced by a commercial loan officer, even for the purchase of real estate?) or refinancing of existing mortgages.
Loan Officer Duties and Responsibilities
This job generally requires the ability to perform the following work:
- Meet with loan applicants to collect personal information and answer questions to assess their loan application and risk.
- Explain to applicants the types and terms of each loan to determine a loan that is right for their specific needs.
- Monitoring and maintenance of credit and credit information
- Search for new clients by contacting companies and people
- Work with existing clients to strengthen relationships, encourage referrals, and improve your reputation among other loan seekers.
- Work with borrowers who do not make their loan payments on time.
- Use loan underwriting software to make referrals to clients
Most loan officer positions combine sales with analytical responsibilities, selling loans and determining the right clients and terms. Some positions are primarily focused on analytics, with no sales dimension and limited customer contact. People in these types of jobs are sometimes called loan underwriters.
Other positions specialize in dealing with customers who are having trouble making their payments. An example is a loan collection officer, who tries to settle troubled borrowers by adjusting payment terms.
In assessing the creditworthiness of loan applicants, loan officers assess the suitability of clients as borrowers and the precise loan terms, such as interest rate and payment schedule, on which credit can be extended. Depending on their position, a loan officer may be expected to actively seek clients, rather than passively wait for applicants to approach their business for credit.
Loan Officer Salary
A loan officer's salary can vary based on their level of experience, area of concentration, and education, according to 2018 data from the US Bureau of Labor Statistics:
- Median Annual Wage: $63,040 ($30.31/hour)
- Top 10% annual salary: $132,080 ($63.50/hour)
- Bottom 10% Annual Salary: $31,870 ($15.32/hour)
Compensation schemes vary by employer, with different combinations of salary and commission. When fees are paid, they typically reflect the amount or value of the loans originated. The higher paying packages tend to be commission based and large institution based. If the compensation scheme is primarily commission based, there is a close correlation between performance and reward, with high earning potential.
Education, training and certification
This career requires the following degrees, experience and licenses:
- Academy – A bachelor's degree in a field such as business or finance is usually required. Courses may include finance, accounting, or economics. A master's degree can make you a stronger candidate for hiring, depending on the company. Also, to be a commercial loan officer, you will need to analyze the financials of the businesses applying for credit. Therefore, this position requires a solid understanding of general business accounting, including how to read financial statements.
- Certification – Most loan officer positions do not require any special certification or licensure. However, a notable exception is home loans. Most states regulate this field, especially when it comes to positions with mortgage banks or mortgage brokers, rather than traditional banks or credit unions. To obtain a Mortgage Loan Originator (MLO) license, applicants must complete at least 20 hours of coursework, pass an exam, and undergo credit and background checks. The American Bankers Association and the Mortgage Bankers Association, as well as several schools, offer courses, training programs, or certifications for loan officers. Although not required, certification demonstrates dedication and experience and can increase a candidate's chances of landing a job.
- Training – Loan officers usually receive some on-the-job training. This can be a combination of formal company-sponsored training and informal training during the first few months on the job.
Loan officer skills and competencies
This position generally requires the following skills:
- Quantitative Skills – Understanding mathematical and numerical data, which is important when working with numbers to determine a loan.
- Good judge of character – making accurate assessments of people, especially their credibility and trustworthiness, when determining a loan
- Interpersonal Skills – Cultivate and strengthen relationships with existing clients, as well as sell loans to new clients.
- Verbal and Written Communication: Explain the loans to clients so they fully understand the terms.
- Independence: Work independently if you have a high degree of professional autonomy.
- Decision-Making Skills – Evaluating a client's loan application and determining if a loan should be made.
- Mental resistance: Rejection of loan applicants who do not meet the lending criteria of the institutions or deal with clients who cannot repay their loans as agreed.
