Credit procedure: what are its stages and how long does it take?

Do you want to apply for a loan? Are you wondering what the credit procedures used by banks look like? You are borrowing money for the first time, so you have no idea what the loan procedure is and why it is used? This article is for you!

Credit procedure: definition

Credit procedure: definition

Let’s start with the basics: what is the loan granting procedure? What does the credit procedure cover step by step? The credit procedure is a mechanism leading to granting credit to the applicant customer, of course, if the bank issues a positive credit decision and decides to borrow money. The credit procedure at the bank is therefore a priority and before we apply for a loan, it is worth finding out how long it takes and what are its stages.

How long does the loan procedure take?

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Another important question faced by potential borrowers: how long does the loan procedure take? First of all, in our heads there are often doubts about how much we will have to wait for the bank’s credit decision? Unfortunately, in this case it is difficult to get a clear answer. The deadline by which a bank issues a credit decision is an individual matter that is affected, among other things, by what loan you apply for. Why is this so important? Lending a client $ 5,000 under a cash loan is a much less serious decision for a bank than, for example, granting a $ 500,000 mortgage that will be repaid over the next 30 years, right?

Credit procedure: stages

Credit procedure: stages

How long does the credit procedure take? One thing is, but how does the procedure for granting a bank loan in individual stages be presented in practice? The first step is for the bank to accept your loan application – the bank analyzes whether the application is complete, etc. The bank granting procedure also assumes that the potential lender will check your creditworthiness. The bank must know that you will have the means to regularly repay your liability. Credit history, collateral for repayment, etc. may also be important. After the bank issues a decision to grant a loan (this may, of course, be refused), it will present you with the proposed terms. After signing the loan agreement, the bank launches the loan.

Why does the bank introduce credit procedures?

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We already know the procedure for granting a bank loan. Knowing what the procedure for granting a mortgage, for example, will look like, can give us a sense of security when applying for it. Appropriate preparation in many cases determines that the mortgage granting procedure will not be a stressful experience for us.

Why exactly do the credit procedures of a modern bank exist? Why is the loan granting process so important for the lender? This is understandable – a bank lending you money takes on its shoulders the specific risk, the higher the amount, the higher it is. The money lending institution wants to be sure that you, as the borrower, will pay off your liability.

Let’s take an example: if you are asked to borrow money from a very distant friend who you hardly know, you don’t feel anxious? You are probably afraid that there is a chance for problems with regulating it. The bank is in the same situation, so it can check your creditworthiness, history, etc.