Many individuals take out loans to buy a house, car, or pay for a college education. Businesses use loans to start companies, purchase inventory, or invest in capital equipment. Loan officers facilitate this lending by finding potential clients and helping them to apply for loans. Loan officers gather information to determine the likelihood that individuals and businesses will repay the loan. Loan officers may also provide guidance to prospective borrowers who have problems qualifying for traditional loans. For example, loan officers might determine the most appropriate type of loan for a particular customer and explain specific requirements and restrictions associated with the loan.
Loan officers usually specialize in commercial, consumer, or mortgage loans. Commercial or business loans help companies pay for new equipment or expand operations. Consumer loans include home equity, automobile, and personal loans. Mortgage loans are loans made to purchase real estate or to refinance an existing mortgage.
Loan officers guide clients through the process of applying for a loan. The process begins with the client contacting the bank through a phone call, visiting a branch, or filling out a Web-based loan application. The loan officer obtains basic information from the client about the purpose of the loan and the applicant’s ability to pay the loan. The loan officer may need to explain the different types of loans and credit terms available to the applicant. Loan officers answer questions about the process and sometimes assist clients in filling out the application.
After a client completes an application, the loan officer begins the process of analyzing and verifying the information on the application to determine the client's creditworthiness. Often, loan officers can quickly access the client's credit history by using underwriting software that determines if a client is eligible for the loan. When a credit history is not available or when unusual financial circumstances are present, the loan officer may request additional financial information from the client or, in the case of commercial loans, copies of the company's financial statements. Commercial loans are often too complex for a loan officer to rely solely on underwriting software. The variety in companies’ financial statements and varying types of collateral require human judgment. Collateral is any asset, such as a factory, house, or car, owned by the borrower that becomes the property of the bank if the loan is not repaid. Loan officers comment on, and verify, the information of a loan application in a loan file, which is used to analyze whether the prospective loan meets the lending institution's requirements. Loan officers then decide, in consultation with their managers, whether to grant the loan.
Commercial loans are sometimes so large—for example, the loan needed to build a new shopping mall—that a single bank will not lend all of the money. In this case, a commercial loan officer may work with other banks or investment bankers to put together a package of loans from multiple sources to finance the project.
In many instances, loan officers act as salespeople. Commercial loan officers, for example, contact firms to determine their needs for loans. If a firm is seeking new funds, the loan officer will try to persuade the company to obtain the loan from his or her institution. Similarly, mortgage loan officers develop relationships with commercial and residential real estate agencies, so that when an individual or firm buys a property, the real estate agent might recommend contacting a specific loan officer for financing.
Some loan officers, called loan underwriters, specialize in evaluating a client's creditworthiness and may conduct a financial analysis or other risk assessment.
Other loan officers, referred to as loan collection officers, contact borrowers with delinquent loan accounts to help them find a method of repayment to avoid their defaulting on the loan. If a repayment plan cannot be developed, the loan collection officer initiates collateral liquidation, in which the lender seizes the collateral used to secure the loan—a home or car, for example—and sells it to repay the loan.
Work Environment
Loan officers held about 322,100 jobs in 2020. The largest employers of loan officers were as follows:
- Credit intermediation and related activities - 82%
- Management of companies and enterprises - 4%
- Automobile dealers - 3%
The credit intermediation industry includes commercial banks, savings institutions, and mortgage companies.
Loan officers who specialize in consumer loans usually work in offices. Mortgage and commercial loan officers may work outside the office and meet with clients at their homes or businesses.
Work Schedules
Most loan officers work full time, and some work more than 40 hours per week.
Education & Training Required
Loan officer positions generally require a high school degree. Loan officers receive on-the-job training consisting of some formal company-sponsored training and informal training on the job over their first few months of employment. Commercial loan officer positions often require a bachelor's degree in finance, economics, or a related field. Because commercial loan officers analyze the finances of businesses applying for credit, they need to understand business accounting, financial statements, and cash flow analysis. Loan officers often advance to their positions after gaining experience in various other related occupations, such as teller or customer service representative.
Certifications Needed
Recent federal legislation requires that all mortgage loan officers be licensed. Licensing requirements include at least 20 hours of coursework, passing a written exam, passing a background check, and having no felony convictions. There are also continuing education requirements for mortgage loan officers to maintain their licenses. There are currently no specific licensing requirements for other loan officers.
Other Skills Required
People planning a career as a loan officer should be good at working with others, confident, and highly motivated. Loan officers must be willing to attend community events as representatives of their employer. Sales ability, good interpersonal and communication skills, and a strong desire to succeed also are important qualities for loan officers. Banks generally require their employees to pass a background check. Most employers also prefer applicants who are familiar with computers and banking and financial software.
How to Advance
Capable loan officers may advance to larger branches of their firms or to managerial positions. Some loan officers advance to supervise other loan officers and clerical staff.
Various banking associations and private schools offer courses and programs for students interested in lending and for experienced loan officers who want to keep their skills current. For example, the Bank Administration Institute, an affiliate of the American Banker's Association, offers the Loan Review Certificate Program for people who review and approve loans.
The Mortgage Bankers Association offers the Certified Mortgage Banker (CMB) designation to loan officers in real estate finance. The association offers three CMB designations: residential, commerce, and master to candidates who have 3 years of experience, earn educational credits, and pass an exam. Completion of these courses and programs generally enhances employment and advancement opportunities.
Job Outlook
Employment of loan officers is projected to show little or no change from 2020 to 2030.
Despite limited employment growth, about 25,000 openings for loan officers are projected each year, on average, over the decade. Most of those openings are expected to result from the need to replace workers who transfer to different occupations or exit the labor force, such as to retire.
Employment
Increased demand for loan officers is expected as both businesses and individuals seek credit to finance commercial investments and personal spending. Loan officers will be needed to evaluate the creditworthiness of applicants and determine the likelihood that loans will be paid back in full and on time.
However, the decline of bank branches and the increased use of productivity-enhancing technology in loan processing are expected to slow employment growth.
Earnings
The median annual wage for loan officers was $63,380 in May 2021. The median wage is the wage at which half the workers in an occupation earned more than that amount and half earned less. The lowest 10 percent earned less than $32,520, and the highest 10 percent earned more than $138,310.
In May 2021, the median annual wages for loan officers in the top industries in which they worked were as follows:
- Automobile dealers - $86,270
- Management of companies and enterprises - $75,360
- Credit intermediation and related activities - $62,950
Compensation varies widely by employer. Some loan officers are paid a flat salary; others are paid on commission. Those on commission usually are paid a base salary plus a commission for the loans they originate. Loan officers also may receive extra commission or bonuses based on the number of loans they originate or how well the loans perform.
Most loan officers work full time, and some work more than 40 hours per week.
