What Are Loan Officers and How Much Can They Charge?
A loan officer’s main goal is to decide whether or not a borrower has the proper eligibility to qualify for a specific loan and then decide which type of loan solution is best for that borrower. The types of loans can vary from personal loans to mortgage loans and beyond. They work hand-in-hand with banks and other lenders and can go by many names such as consultants, mortgage bankers, etc.
The Basics Of a Loan Officer
From a wider perspective, a loan officer’s job is evaluate a prospective buyer, create authorization around their information, and approve their loans. As technology advances and computers are able to handle the same types of algorithmic jobs as humans, some people feel that it isn’t completely necessary to have that facetime with a loan officer. Many of these computerized loan programs will vet the applicant and create the same approval or denial of an application.
With that said, these programs are quite expensive to upkeep, meaning smaller lenders, such as your local credit union, will likely still have a loan officer their to screen your application. Even at larger lenders, working with a human being can have benefits. This is especially true if you have special circumstances.
Many of these computerized credit-scoring algorithms have been known to have racial, financial, and other types of bias in a number of cases. Essentially, though it may be quicker and easier to use an algorithm, you may not get the approval you’re looking for.
How Much Does A Loan Officer Charge?
Many loan officers are paid solely off of commission while others are paid salary. Those that are paid off of commission will likely get paid 1% of the entire loan amount. Basically, if a loan officer writes you a $300,000 loan, they receive a $3,000 commission.
There is a problem for you as a consumer if you deal with a commission-based loan officer. As you probably can guess, a smaller bank would not be able to do this unless they were pulling in extra money from elsewhere. The way that they are able to offset these costs is by charging higher interest rates and stacking on extra fees right off the bat.
So What Should You Do?
The question is now, how can you save yourself the extra money and higher interest rates that you’ll incur by signing a loan with one of these loan officers?
The main thing is that you must do your research. Go to different lenders. Find loan officers that get paid salary instead of commission. Don’t, by any means, ever accept the very first offer that you get. You’re making a big commitment and you want to have faith that you’re going with the most trustworthy person with the best deal. You can also try going to a broker if the loan officers aren’t working out.
Do you have any positive or negative experiences dealing with a loan officer? Please share in the comments!