10 Key Factors For Granting Loans

1. Ability to Pay. Look at applicants net or gross income in comparison with their monthly
payments. A debt ratio worksheet often helps with this task. Dont forget to review such
items as child support or alimony payments, as well as property taxes.
2. Intent to Pay. Is there evidence in a credit bureau report that the member pays their bills?
Are they old enough to have established credit? How old is the credit history? Is there solid
evidence of good intention?
3. Unsecured Debt as a % of Total Debt. When a member has excessive unsecured debt and
no assets, they may be a candidate for bankruptcy. Scrutinize the overall debt picture. Is the
amount of unsecured debt excessive or does it make sense given the circumstances?
4. Seeing Nothing Bad Does Not Mean Everything is Good. Often times, loans are made to
members with little or no credit history, no assets, short-time jobs, etc. In these cases, there
is too little information to determine if theres anything bad about the applicant. Use
caution because in these cases, there isnt enough information about the member, good or
bad.
5. Pyramiding Indebtedness. Look at the members debt structure and see if it has changed
over the last 12-18 months. Also, see if their income has changed accordingly. Is the
member becoming more and more indebted? Or does the pattern make sense considering the
circumstances?
6. Assets. Does the member own a car, house, etc? Does the member have savings? There
should be some relationship between their indebtedness and their assets. If theres
substantial indebtedness and no real assets, use caution.
7. Collateral. Always explore opportunities to make a secured loan vs. an unsecured loan. Be
creative.
8. Job Security. What is the likelihood of a lay-off where the member works? Does the
member show a consistent work history in his field? Is it likely they possess the education or
job skills needed to make them a valuable candidate on the job market?
9. Consistency. Be consistent in analyzing loan applications. Treat all members the same.
Consider debt ratio calculations consistently from member to member. In cases where
exceptions are made to policy, document! Document! Document!
10. Opportunities. Look first at what the member qualifies for and needs, not what they apply
for. Then sell the member and create a win-win situation.

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