Loan Consideration
For both secured and unsecured loans, lenders will first look at the potential borrower’s credit history and how they have conducted their previous and current credit or loan accounts.
Then, they must consider affordability which put simply, means the lender must decide if the borrower can afford the loan based on their income and outgoings.
For secured loans (which by their nature are secured against property), they will also consider the equity in the property against which the loan is secured. This equity is the difference between the value of the property and the outstanding mortgage balance.
Based on the areas of credit history, affordability and equity (for secured loans only) the lender makes a risk assessment of how likely is it that the borrower will repay the loan. If the risk is too high, the borrower will be declined for the loan. If the risk is acceptable, then the lender will (subject to other minimum requirements) make a loan offer.
