Scribd
Upload
1 views

Lending Process

The UK lending process involves several key steps, starting from the loan application and initial assessment to loan approval, documentation, and disbursement of funds. It includes detailed evaluations of borrower eligibility, affordability assessments, and compliance with regulatory frameworks. After loan closure, lenders may continue to provide customer support and update credit reports accordingly.

Uploaded by

kpslash18
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
1 views

Lending Process

The UK lending process involves several key steps, starting from the loan application and initial assessment to loan approval, documentation, and disbursement of funds. It includes detailed evaluations of borrower eligibility, affordability assessments, and compliance with regulatory frameworks. After loan closure, lenders may continue to provide customer support and update credit reports accordingly.

Uploaded by

kpslash18
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 5

The lending process flow in the UK involves several key steps, from the initial loan

application to the disbursement of funds and beyond. Below is a detailed overview


of the lending process:

### 1. *Loan Application*

- *Initial Inquiry*: The borrower approaches a lender (bank, building society, credit
union, or other financial institutions) to inquire about loan options.

- *Application Submission*: The borrower completes and submits a loan


application form, providing personal, financial, and employment details.

### 2. *Initial Assessment*

- *Preliminary Check*: The lender performs an initial assessment to determine if


the borrower meets basic eligibility criteria.

- *Credit Check*: The lender conducts a credit check to assess the borrower's
creditworthiness using credit bureaus like Experian, Equifax, or TransUnion.

### 3. *Detailed Evaluation*

- *Document Submission*: The borrower submits necessary documentation, such


as proof of income, bank statements, ID, and other required documents.

- *Affordability Assessment*: The lender evaluates the borrower's income,


expenses, and existing debts to determine if they can afford the loan repayments.

- *Collateral Valuation*: If the loan is secured (e.g., a mortgage), the lender


arranges for the valuation of the collateral (e.g., property).

### 4. *Loan Approval*


- *Underwriting*: The loan application is reviewed by an underwriter who assesses
the risk and decides whether to approve the loan.

- *Approval Decision*: The lender communicates the approval decision to the


borrower, specifying loan terms such as interest rate, repayment period, and
conditions.

### 5. *Loan Offer and Acceptance*

- *Issuance of Loan Offer*: If approved, the lender issues a formal loan offer
outlining the terms and conditions.

- *Acceptance*: The borrower reviews and accepts the loan offer, signing any
necessary agreements or contracts.

### 6. *Loan Documentation*

- *Documentation*: The lender prepares and processes the necessary legal and
financial documents.

- *Signing*: The borrower signs the loan agreement and any other required
documents.

### 7. *Disbursement of Funds*

- *Fund Transfer*: Once all documentation is complete and any conditions are met,
the lender disburses the loan funds to the borrower’s account or to the seller’s
account (in the case of a mortgage).

### 8. *Repayment and Monitoring*


- *Repayment Schedule*: The borrower begins repaying the loan according to the
agreed-upon schedule (e.g., monthly installments).

- *Monitoring*: The lender monitors the loan to ensure timely repayments and
may provide customer support as needed.

### 9. *Loan Closure*

- *Completion*: The loan is considered complete once all payments have been
made and the borrower has fulfilled all obligations.

- *Release of Collateral*: If the loan was secured, the lender releases the collateral
(e.g., removes the mortgage charge from the property).

### 10. *Aftercare*

- *Customer Service*: The lender may continue to offer customer service and
support for any post-loan queries or services.

- *Credit Reporting*: The lender updates the borrower's credit report to reflect the
status of the loan.

### Key Participants

- *Borrower*: Individual or entity applying for the loan.

- *Lender*: Financial institution providing the loan.

- *Credit Bureaus*: Agencies providing credit reports and scores.

- *Underwriters*: Professionals assessing the loan application risk.

- *Legal and Valuation Experts*: Individuals or firms conducting legal checks and
property valuations.
### Regulatory Framework

- *Financial Conduct Authority (FCA)*: Regulates the conduct of lenders and


ensures compliance with financial regulations.

- *Prudential Regulation Authority (PRA)*: Oversees the financial stability of


lenders.

- *Consumer Credit Act 1974*: Governs consumer credit and loans.

- *Mortgage Market Review (MMR)*: Provides guidelines for responsible lending


practices.

This structured approach ensures that loans are processed efficiently while
mitigating risk for lenders and providing clarity and protection for borrowers.

1. Collecting clients details


- Three years address history
- Three years employment history
- Personal details (Date of birth, name changes etc.)
- Full KYC
- Bank account details
- Loan amount & purpose of loan
- If existing client, check payment record
2. Credit searches
- Channel Islands Data Service (CIDS) for local information (judgments,
payment records)
- Experian / Equifax / Integricheck for records on previous addresses, also off
Island
3. Confirming affordability of repayments
- Income & Expenditure based on latest three months bank statements (for
businesses at least latest three months bank statements as well as last three sets
of accounts)
- Affordability: At least 10% of income must be left after deducting all
expenses including new loan
- AML risk assessment (from template)
- Collecting additional information (i.e. credit card statements for
consolidation)
4. Internal underwriting of loan application based on above information
- Underwriter looks at the following criteria: No adverse information in credit
checks, payments must be affordable, no AML risk, no or little money spent on
online gambling, betting etc.
- Decline if any of the above criteria is not met
5. Signing of agreement and pay out of funds
- Once the loan application has been approved, the borrower will sign the
loan agreement with the loan company
- If there is any part of KYC missing, it will be completed at this stage
- Once the agreement has been signed the funds will be paid out to the
borrower (depending on loan purpose a payment to a third party is also possible,
i.e. to a garage if a car is to be financed)
6. Start of repayments
- Repayments will start no later than one month from the agreement date
- Payments will be taken from the borrowers bank account by direct debit,
cash will not be accepted

You might also like