A borrower can obtain a bank loan when he meets the bank’s lending criteria. This is determined during an application process where the borrower provides information related to his credit history, credit score, current employment and potential assets that could secure the loan.
For example, if the loan is for a car or a house, the car or the house is the collateral used to guarantee the loan. Credit score is a major determinant in the interest rate of the loan and how much money is available to the borrower. A borrower’s income determines ability to make loan payments.
After the borrower completes the loan application, there is a waiting period during which the bank sends the application to its underwriting department for evaluation. If the bank determines the borrower is worth the risk, they grant the loan. If the bank decides the borrower runs the risk of not repaying the loan, there is still the possibility that he can get a bank loan by bringing outstanding debts current or applying for a smaller loan that is less risky for the bank. Alternately, he can engage a cosigner to share the responsibility for repaying the loan, which makes the bank more comfortable approving the loan.