A loan is in underwriting when it is in the final stages of the application phase and the lender is reviewing all your information and deciding whether to approve your loan or not.
Being in underwriting is a good thing, since you have made the final stage and are now just waiting for a decision. The answer can be a simple ‘yes’ or ‘no’, or the lender may contact you for more information such as requesting a proof of address or a bank statement.
The role of the underwriter is usually a very specialist job in the organisation and their role is to assess risk and decide who gets a loan and who does not.
How long does underwriting take?
Underwriting can take anywhere from a few hours to a few days depending on the amount you have asked to borrow and the type of loan.
For unsecured loans, underwriting usually takes up to 1 day, but for something like a mortgage or secured loan, this can take several days since there are other factors and assets that need to be valued and assessed.
Some companies have automated underwriting systems and some are very manual. Sometimes it is because there is a backlog of applications to go through and that is what is causing the delay.
What happens during underwriting?
During the underwriting process, the lender or underwriting team will assess all the information you have provided in the loan application. On this basis, they will make a decision whether you are eligible to borrow the amount you have requested or not.
The underwriters may:
- Approve the loan
- Request more information
- Decline the application
- Adjust the terms e.g offer a lower or higher amount
During underwriting, the company will be reviewing all relevant information including:
- Age
- Location
- Form of residence
- Income
- Employment
- Credit score
- Loan amount
- Loan duration
- Additional docs such as pay-slips and bank statements
- History with the lender
- Phone calls with the customer
Checking your details
On a basic level, the underwriters will need to confirm your full name, address, contact details, date of birth, income and monthly expenses.
Most of this information is processed automatically during the online application – and the underwriters may look at this in more detail.
Being single, a homeowner or having children may impact how much you can borrow – and underwriters will use this information to make an informed decision.
Credit checks
When
applying for personal loans, it is common for the lender to carry out credit checks – since this gives an indication of how well the borrower has repaid other forms of debt and credit in the past.
Whilst lenders will usually have a scoring system in place, they may look into your credit report in more detail and look at particular transactions to get a better idea.
Affordability checks
Underwriters will typically run affordability checks to match the amount you have requested to borrow with what you can afford to repay.
The lender will take your income into consideration as well as your monthly bills, expenses and other financial commitments – and this will be used to determine how much you can borrow and whether you will be eligible. In this case, you may find the lender could request further documentation in the form of payslips, bank statements or similar.
Is there anything I can do during underwriting?
As an applicant, you will simply need to wait to hear from the lender. It will help to be available by phone or email in case they have any follow up questions. The faster you can respond, the quicker your application can be processed.
You certainly do not need to re-apply with the same lender once you have submitted your application. However, if you feel that the application is taking a long time, you can always get in touch by email or phone and ask for an update.
Can I still apply elsewhere whilst my loan is in underwriting?
Yes, you may still apply for a loan elsewhere if your loan is underwriting. You may find that you can get a faster decision or approval from another provider, or maybe not. However, you should avoid making too many applications with other companies in a short space of time, since this will make you look financially desperate and is likely to be flagged by other lenders when applying.
