Loan Officers Overview
Close to 9 out of 10 loan officers work for commercial banks, savings institutions, credit unions and related financial institutions. Mortgage and consumer loan officers have great opportunities and even better opportunities are projected for commercial loan officers. Some loan officer positions require only a high school diploma, while other careers like a commercial loan officer, a bachelors degree is required. Employers prefer to hire applicants who have prior experience in banking, lending or sales. Earnings depend on the number of loans generated, which fluctuates significantly with a strong economy and low interest rates.
Nature of the Work for Loan Officers
Loans come in all shapes and sizes and can be used for individuals as well as business. People may take out a loan for a new car, house or to pay for a college education. Businesses need loans to start companies, purchase inventory or invest in capital equipment. Loan officers are hired to seek out potential clients and aid them with the loan application process. They collect statistics that help to determine the likelihood that a person or business will repay the loan. They may also counsel prospective borrowers on problems qualifying for traditional loans. There are three main specialties for loan officers, including commercial, consumer or mortgage loans. A business that needs help funding new equipment and growing operations may apply for a commercial loan. Examples of consumer loans are home equity, automobile and personal loans. To purchase real estate or refinance an existing mortgage, a person must take out a mortgage loan. Loan officers are specifically trained to aid clients through the loan application process. After the client contacts the bank via phone call, visiting a branch or filling out an internet loan application, the loan officer obtains basic information from them regarding the purpose of the loan and the applicant’s ability to pay the loan. Loan officers are also responsible for the explanation of the various types of loans and credit terms. In some cases, the loan officer will assist the client in completing the application.
After an application is submitted, the loan officer determines the client’s creditworthiness through analysis and verification of the information on the application. Loan officer can quickly access the client’s credit history with underwriting software that determines if a client is eligible for a loan. Sometimes, a clients financial history may be unavailable in which case the loan officer will request more information from the client, or in the case of commercial loans, copies of the company’s financial statements.
Due to the complexity of commercial loans, underwriting software does not always support the commercial loan application process. Each company’s financial statements are varied and there are a multitude of types of collateral that requires human judgment. Any asset that is owned by the borrow that becomes the property of the bank if the loan is not repaid is known as collateral. The loan information is used to verify that the prospective application meets the financial institutions requirements.
In some instances, commercial loans are so large that a loan from more than one financial institution is needed. In this case, a loan officer will work with other banks to create a package of loans from multiple sources.
Sales skills are helpful for this position because loan officers sometimes call business to determine their loan needs and they have to persuade the potential client to choose their particular bank or financial institution. In the same vein, mortgage loan officers will form contacts with commercial and personal real estate brokers in hopes that person will recommend their services when an individual buys property.
Loan collection officers work with individuals or business that do not pay in a timely manner. They will contact the entity and work with them to devise a repayment plan to avoid defaulting on the loan. Sometimes a repayment plan cannot be developed, in which case the loan collection officer will instigate a collateral liquidation, in which the lender seizes the collateral and sells it to repay the loan.
Most loan officers spend a considerable amount of time out of the office, however consumer loan officers usually do not follow this trend. Commercial and mortgage loan officers often rely on cellular telephones and laptop computers to conduct business when they are away from the office. Many mortgage loan officers usually work from home and frequently travel to client’s homes and offices to complete applications and other paperwork.
Many loan officers work more than 40-hours a week, depending on the number of clients. When interest rates are low, or the economy is stable, there is a boost in loan applications, which leads to longer hours for loan officers.
Training, Other Qualifications and Advancement for Loan Officers
The minimum education required for a loan officer is a high school diploma in combination with on-the-job training. First, employees must attend a formal company-sponsored training then for the first few months of employment, a more informal on-the-job training is required.
A commercial loan officer usually is required to hold a bachelors degree in finance, a bachelors degree in economics or another related field. As commercial loan officers work closely with finance of businesses, a background in business accounting, financial statements and budget analysis are encouraged. Typically, a loan officer has advanced from a teller or customer service representative position.
Only mortgage loan officers are required by Federal law to obtain licensure. They must complete at least 20 hours of coursework, complete a written examination, pass a background check and have no convicted felonies. After attaining a license, mortgage loan officers must fulfill the continuing education requirements in order to keep their license.
Desirable skills for a loan officer include excellent communication skills, confidence and ambition. They will often be the liason between the financial institution and community, so applicants must have strong interpersonal skills. Most employers favor applicants who have previous banking experience or sales experience. Knowledge of computers and banking software are ideal skills that employers look for. Loan officers are usually required to pass a background test.
Top 10 Most Popular Finance Schools
1. University of Pennsylvania (Philadelphia, Pennsylvania)
2. University of Illinois, Urbana, Champaign (Champaign, Illinois)
3. DePaul University (Chicago, Illinois)
4. Florida International University (Miami, Florida)
5. University of Florida (Gainesville, Florida)
6. University of Central Florida (Orlando, Florida)
7. New York University (New York, New York)
8. Tulane University (New Orleans, Louisiana)
9. Texas A & M University (College Station, Texas)
10. Pace University, New York (New York, New York)
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Employment and Job Outlook for Loan Officers
Number of People in Profession
Changing Employment (2008-2018)
Employment is projected to grow about as fast as average (increase 7 - 13%).
Loan underwriting software allows loan officers to evaluate more loans in less time and makes the overall process easier. The mortgage loan application process has also been simplified by automation. In fact, there some online vendors that accept loan application from customers over the Internet to determine which vendor offers the lowest priced loan. This process bypasses the need for mortgage brokers, which will show a decrease in positions for mortgage loan officers.
College graduates and people with banking, sales and lending experience will all have the best prospects. Many job openings will come from employees who retire or leave the occupation permanently. Commercial loan officers should see excellent opportunities as banks report having difficulty finding qualified applicants.
The number of job opportunities for a loan officer directly correlate to the volume of applications. The demand for new loans fluctuates and is determined mostly by interest rates and the overall economic stability. When the economy is booming and interest rates are low, there are many opportunities for loan officers and they may have to work long hours in order to process all of them. Loan officers get paid by commission, so when the economy is in a decline, they may see pay decreases and possible layoffs. In times of an economic downturn, there is an increased need for loan collection officers.
Earnings and Salary for Loan Officers
Median annual wages of loan officers is $54,880. While the top 10 percent earned more than $105,330, the lowest 10 percent earned less than $31,030. Loan officers are compensated in a variety of ways. The majority are paid a commission based on the number of loans they originated. These loan officers usually earn more than those on a salary. Loan officers who work in large financial institutions generally make a higher salary than those in small institutions. Median annual wages by highest employing industries are:
Federal Executive Branch: $69,070
Management of companies and enterprises: $58,100
Nondepository credit intermediation: $54,240
Activities related to credit intermediation: $54,140
Depository credit intermediation: $53,490
Annual Salary for Loan Officers
On average, Loan Officers earn $54,880 per year.
Source: Bureau of Labor Statistics Occupational Outlook Handbook