Loans are financial aid given to an interested person by a financial institution based on the reasons the present. It is upon the financial institution to come in and determine the truth behind the reasons presented for the loan. The assessment of the need presented for the loan then gives light on whether to render the borrowed money or just let it be. This is judged depending on the various procedures put across by the financial institution. The financial history of a person is what gives a description of their ability to settle the loan they are interested in and hence should carefully be looked at by the institution before any step is made. If a prospective borrower is observed to have cleared all loans taken previously on time then they can be said to be in a position to clear a loan duly. A new creditor should be assessed according to the frequency of deposits which they have been able to make previously with the institution.
Bad credit records are a result of poor planning. When a borrower is not able to budget well on the loan money they get they end up investing it wrongly which means they will most likely not get the expected results of profit from it. When the targeted profit is not achieved then the loan payment is also delayed. Before giving a loan the financial institution should have gone through the intended use of the money to know whether it will give any returns.
Financial institutions are charged with the responsibility of ensuring there is proper security for loans they are about to render. There have been cases of dishonest persons who have in the past given a wrong record of their security to get a loan. Since the fraudsters have no aim of paying back the money and there is no proper security tied unto them the institution ends up incurring heavy losses. Trustees presented should have a proper financial record and ability. Trustees are defined as persons who are in a position to come in and help settle a loan in case the borrower is not able to. Trustees should be in a position to provide the needed security to a loan.
Some financial institutions can be termed as young financial institutions. The capacity of the institution in lending is a major contributing factor. The size of their capital base is still small and hence they are not in a position to withstand delayed payments for too long. This calls for high intelligence when dealing with the creditors in order to see to it that bad debts are not encountered.