Navigating the challenges of the modern financial world can, at times, seem daunting. Loan officers, however, work to alleviate those challenges by guiding individuals towards financial success. Loan officers play an integral role in not only selling loans and financial products to clients, but educating those clients and customers about the various options available to them.
Think that this career might be for you? Below, we offer some tips, facts, and answers to common questions that you can use to start your journey toward success.
What Does a Loan Officer Do?
Simply put, loan officers help people acquire loans. They typically work with a bank or credit union and are seen as intermediaries between these financial lending institutions and potential borrowers. Loan officers consistently recommend loan applications for approval, and a great deal of their work involves mortgage and commercial loans. For this reason, individuals in these roles must have a comprehensive understanding of industry rules and regulations, as well.
Read on to explore some of the other top responsibilities of loan officers.
1. Evaluate Potential Borrowers
One of the most important tasks that loan officers perform is the evaluation of potential borrowers to determine whether or not they should be issued a loan. The goal of this evaluation is to differentiate between those borrowers are most likely to be able to repay their debt and those who are not, so that risk can be managed and profits realized. By necessity, this evaluation requires loan officers to have a firm understanding of topics ranging from credit to finance and accounting.
2. Educate Customers About Financial Products
Though some borrowers will know right away the type of loan that they are looking for and the terms that they require, many others will need to be educated about their options. It is the loan officer’s responsibility to provide that insight to the borrower, and in order to do that successfully, loan officers must be comfortable with the several types of loans available.
While each loan officer and company may differ on their specialty, the most common types of loans include:
- Mortgages: These loans are utilized to finance homes, and allow lenders to spread out the cost of a home over several years. As with most consumer loans, the borrower pays back the loan over a period of time at a “fixed rate,” which typically entails monthly installments over the course of a predetermined amount of years.
- Student Loans: Student loans can be broken down into two categories: subsidized and unsubsidized. Subsidized loans are for students with the highest financial need, while unsubsidized loans are for the average borrower regardless of their financial situation. Most student loans maintain a fixed interest rate and usually do not require the borrower to start paying it back until after they graduate.
- Business Loans: For business owners looking to expand their inventory, move locations, or start a new business, business loans are an excellent way to cover costs with short-term financing. Typically, business loans involve general expenses, however, lenders can work with business owners to finance their specific business needs, as well.
- Personal Loans: Whether it’s consolidating credit card debt, paying for special events, or covering medical expenses, personal loans cover a wide range of financial needs. Interest rates and repayment options for this type will vary depending on the lender and on the borrower’s amount of financial need.
Each of these four types of loans is unique in the stipulations and details for the lender and borrower, which is why loan officers must maintain a deep understanding of the laws and regulations impacting their industry as well. With a greater understanding of industry laws, loan officers can guide borrowers on the right path for their financial needs in a collaborative, transparent way.
3. Communicate With Current and Potential Customers
In between assessing potential borrowers and creating financial projections, loan officers spend countless hours each week communicating—with existing customers, potential customers, and even internal members of their team. Whether they speak to these parties by email, phone, or face-to-face, communication plays an incredibly important role in this position.
In order to effectively communicate with these different parties, loan officers must be able to tailor their mode of communication to best fit each audience. While coworkers might be comfortable using more technical phrases, many customers require more advanced financial topics be broken down into simpler terms to truly understand what they are being told.
Salary and Job Outlook
The average loan officer makes a median income of $63,960 per year, while the highest 10 percent earned more than $133,850 annually.
Alongside their base salary, it is not uncommon for loan officers to receive a commission for their work, as well. A loan officer’s commission is determined by the number of financial products that they sell in a given period of time. Depending on how commissions are awarded and what the loan officer’s base salary is, this additional payment has the potential to drive a large percentage of skilled loan officers’ income.
Another benefit of this career is that those in this role can enjoy a stable job while having the flexibility to work a schedule around their home life. Though many loan officers are required to work unconventional hours to accommodate clients overall, this job has been ranked above average in schedule flexibility.
How to Become a Loan Officer
In order to become a loan officer, you will likely need to earn an appropriate degree, gain professional experience, and develop your skills to the point where you can effectively guide potential customers in choosing a loan.
Getting the Appropriate Degree
Degrees in accounting, finance, economics, or business administration are just a few examples of relevant studies and coursework needed to navigate the current financial world. Loan officers should consider completing a degree program like this to help develop necessary industry skills, such as financial analysis, accounting, sales, project management, and data analytics.
What’s more, those who complete an undergraduate degree at a top university like Northeastern will have countless opportunities for hands-on learning throughout their program. Opportunities like these allow students to not only develop the relevant skills needed to achieve success, but also help to create a valuable network of industry-leading professionals.
Did You Know: Individuals with a college degree earn an average 67 percent more money annually than those with only a high school diploma.
Successful loan officers share a strong understanding of mathematics and critical thinking. They must also be able to effectively break down and communicate financial concepts in a way their customers can understand.
What’s more, developing the interpersonal skills necessary to understand a borrower’s intent in seeking a loan is just as important as evaluating the financial details of the loan itself. That’s why basic communication skills such as reading comprehension, verbal communication, and active listening are vital for individuals in these roles.
As loan officers must comply with certain laws that regulate the field, they may be required to receive licenses or certifications in order to legally approve specific loans for potential borrowers.
Loan officers responsible for originating mortgages, for instance, must follow the Secure and Fair Enforcement for Mortgage Licensing Act, which establishes requirements for the licensing or registration of all Mortgage Loan Originators (MLO). In order to work in this sector, loan officers must complete a certain number of hours of continued education, and pay yearly renewal fees to the NMLS.
Loan officers who work with other types of loans may need to receive similar certifications as applicable. These certifications and licenses often include passing a criminal background check and credit review, as well as an assurance that the individual has met all educational requirements.
Staying up-to-date on industry trends is a key point of emphasis for lending organizations, as well. For instance, many companies will pay renewal fees for their loan officers and offer continuing education classes to ensure their employees are best equipped to guide clients through the modern financial climate.
While becoming a loan officer requires a number of steps and clearances (which can vary depending on the state), on-the-job training is a common necessity for individuals in these roles. Some companies offer on-the-job training as part of their orientation process while others provide virtual seminars and online certification courses to ensure their loan officers are up-to-date on the latest industry trends.
Like many industries, the world of finance offers a pathway to learn and grow from current professionals through entry-level work. Positions at this level in customer service, banking, or sales, for example, all provide excellent hands-on learning experiences for aspiring loan officers.
Those looking to practice skills hands-on can also do so by enrolling in a program that values experiential learning, such as Northeastern’s Bachelor of Science in Finance and Accounting Management.
Northeastern provides students with this high level of exposure to hands-on learning through:
- Experiential Learning at Work: Working professionals can collaborate with their employer to develop a project addressing a current business need in an area of familiarity.
- Experiential Network: Students can virtually work with a sponsoring organization on a project over a six-week period.
- Co-op Opportunities: Northeastern students on co-op work in a paid position in their field of study for three to six months.
These experiential learning opportunities give students an unparalleled look into industry trends and techniques, all while learning in an environment unrestricted by the walls of a classroom.
Chart Your Path to Financial Success
Achieving a career as a loan officer requires a deep understanding of the rules, regulations, and best practices surrounding the financial industry as a whole. Consider a degree in finance and accounting management and take the first step toward a career that allows you to help others navigate financial challenges while providing a blueprint for overall success in today’s modern financial world.
Editor’s note: This article was originally written in December 2019. It has since been updated for accuracy.