There are times when you urgently require a large sum of capital. In that scenario, you take loans either secured or unsecured. You must check your requirements to understand which loan is the most suitable. Four major steps are an integral part of taking a loan. You have to be careful while applying for an instant personal loan. The different phases in a loan lifecycle ensure the maintenance of a loan. According to the reports by Forbes, about 42% of small businesses have their financing needs met by a loan. Thus, before taking any loan, you should do an in-depth study of the loan.
Phases of a Loan Lifecycle
Below are the steps mentioned:
| Application
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- The application process for taking a loan is simplified.
- You must gather information about the loan from the lender according to your requirements.
- After collecting information, you should fill in the details of the mortgage loan program.
- This includes a full disclosure of all costs and expenses.
- You must ensure the lender has a secured source of income.
- You should understand how a purchase contract works and how to fill in the appropriate information.
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| Processing |
- The processing of a loan is the next step in a loan cycle.
- The collection and verification of detailed information on the borrower’s credit history.
- The financial assets and current financial situation are the top concerns of a lender.
- This information is taken to assess the ability of the borrower to repay the loan amount.
- Deposits such as credit report fees and appraisal fees must be paid to the lender
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| Underwriting |
- Underwriting is the next step in filing for a mortgage loan.
- Loan underwriting is a process of evaluating if the loan is a suitable risk for the lender.
- As a lender, you must ensure to avoid any possible undue risks.
- The loan application is evaluated based on the following:
- Reviewing the borrower’s background
- Review of any assets
- Discussion of set conditions and
- frequent follow-ups
- Once the loan is approved, a commitment letter is released.
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| Closing |
- The concluding step is funding and loan closing.
- The final details of the loan transaction are completed, and the loan funds are disbursed.
- It is usually done by a closing attorney or a recognised company.
- The loan closer obtains a title company’s opinion as to the condition of the title to the property and its ownership.
- A careful examination is made if the seller owns the property and no outstanding is against it.
- In addition, the borrower must offer sufficient hazard insurance for the property if they fail to repay.
- The loan’s legal documents are made. One must ensure that the legal requirements are met. These include up-to-date payments of real estate taxes.
- The mortgage loan file and legal documents are double-checked for completeness and accuracy.
- Some federally mandated disclosures are usually provided to the borrower.
- Finally, the loan amount must be properly disbursed so the borrower will be liable for repayment.
- The appropriate parties must receive the correct amounts in order for the legal conditions for the best to be met.
- The mortgage is recorded on the public record, and the lender makes a final review of the loan file for quality control purposes
- At this point, the closing of the loan is complete.
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Conclusion
In a nutshell, understanding the various aspects of a loan lifecycle is highly significant. A loan can be proven as a boon or bane based on your utilization. Follow the steps of taking a loan carefully to avoid any unnecessary problems. The major steps of the loan lifecycle are application, processing, underwriting, and closing. A lender and borrower must go through this tedious process to have a smooth flow of operations.
