Monday, June 11, 2007

Some Factors Bank Managers Consider Before Granting Loans

There are many factors which may influence the granting of loans by most Bank Managers and a number of them are outlined below;
1. The type of Account The Customer operates: Although non-account owners get loans, loans are normally given to current account owners more than those who operate savings accounts.
2. The Amount Involved: If it is a large sum of loan, the Bank Manager will consider whether if such an amount is removed, it will not affect the financial standing of the bank.
3.The Past Financial Dealings of the Customer with the Bank: one with sound past financial dealings with a bank has a higher chance of getting a loan and vice versa.
4. The Purpose for which the loan will be used: financially yielding projects are considered more buy bank managers in order to make sure that the loan will be used for projects that will yield profit so that it will enable the borrower to repay the loan.
5.The Collateral Security Offered:These collateral securities which are fixed assets must be the things the bank can sell easily and more than the value of the loan given.
6. The Period of Repayment: The period of re-payment of such loan is very important because, the Bank would not want its loan to be tied down for a very long time in spite of the fact that it changes interest on the loan.
7. The Customers Referee: The referee must be one who is well known to the bank and who will guarantee that in case the borrower defaults or becomes insolvent, that he will repay the loan.
8. The Earning Power of The Customer: The person's earnings vis-a-vis the amount to be given out as loan are some of the determining factors in granting and issuing loans.
9. The Sources of Re-payment: The Bank Managers will also like to know the possible sources the customer intending to borrow loans has for repaying the loan.
10. The Present Government Policy on Bank Lending: A Customer may fulfill all the "Conditions" but if government policy on lending is credit squeeze, the Bank will not grant the Loan and vice versa.


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