Loans can help make dreams – dreams of home ownership or of starting a business, for example – come true. Loan officers play a crucial role in making loan applications a reality. Although loan officers often work for lenders such as banks and other financial institutions, they require a much more advanced skill set than entry-level bank roles like teller and customer service representative. A bachelor’s degree in business or finance is usually a requirement to work in loan origination, according to the United States Bureau of Labor Statistics (BLS), and licenses or certifications may be mandatory or preferred in certain situations.
The Role of a Loan Officer
Loan origination might sound like a complicated term, but it simply refers to the process of securing money from a lender. A loan officer leads the applicant through several steps to process an application and essentially secure the funds, which will need to be paid back with interest. While some applicants seek out loan officers to ask for help getting a loan, the sales-related work of contacting potential borrowers offering loans can also fall under a loan officer’s responsibilities.
Once a prospective borrower has applied for a loan, it is the loan officer’s job to collect information and documentation used to help the lender decide if the loan will be approved. Banks and financial institutions make money on the loans they grant, but they can lose money if the borrower neglects to make the agreed-upon payments. As a result, lenders look at factors such as income, credit history and employment history to weigh the risk and require a great deal of documentation before they will approve a loan. Loan officers get this information from the loan applicant, but they also educate borrowers about loan terms and the lending process. Lending is heavily regulated, and it is the job of a loan officer to make sure that a financial institution’s loan agreements are acceptable under these regulations, the BLS reported. Ultimately, loan officers are the ones who approve or deny loan applications, or at least the ones who recommend an approval or denial to decision-makers.
There are several different types of loan officers. Consumer loan officers process loan applications by individuals, while commercial loan officers lend money to business entities. Mortgage loan officers specialize in loans for real estate purchases. Loan underwriters work on the process of underwriting, or determining the risk to the financial institution based on the applicant’s data and financial history. When a borrower who received a loan fails to make payments, a loan collection officer will try to find a resolution that results in the lender receiving some amount of payment, even if the payment duration or structure changes.
The BLS reports that 80 percent of loan officers work in credit intermediation, an industry that encompasses banks and mortgage companies. Small percentages of loan officers work for the management of companies and enterprises industry or for automobile dealers. This occupation, which has a median annual wage of $64,660, is experiencing faster than average job growth at a rate of 11 percent.
Loan officers who specialize in mortgage loans – loans that are specific to real estate properties – are sometimes referred to as mortgage loan originators.
Finance Degrees and Loan Origination Careers
Loan officer is a finance career, one that often involves working for a financial institution like a bank and understanding loan types, terms and interest rates. Unsurprisingly, many loan officers prepare for their careers by earning a bachelor’s degree in finance. As an undergraduate finance major, be prepared to study topics such as financial analysis, business finance, international finance, investments and financial management. Coursework in risk management will help you as you evaluate the risk of lending money to applicants with different financial situations. Taking classes in other areas of business, including economics, accounting and business management, will help you cultivate a thorough understanding of how businesses – including financial institutions – work.
Some colleges offer specialized programs – including at the associate’s or graduate certificate level – in topics like mortgage banking. These focused educational programs may be the perfect fit if you know early on which area of loan origination interests you.
Business Degrees for Aspiring Loan Officers
You can also become a loan officer with a more general business degree, according to the BLS. Bachelor of Business Administration (BBA) degrees are known for equipping students with a breadth of business knowledge and skills. Finance is one of the major subject areas that makes up the curriculum of a business degree, along with accounting, management, marketing, human resources and economics.
In many BBA programs, students have the opportunity to focus their education with an area of emphasis. Finance, accounting or management concentrations may all make sense for students who are working toward a career as a loan officer. Some BBA programs offer more specialized concentration options, such as real estate finance, which might be a great fit for aspiring mortgage loan officers.
A Mortgage Loan Originator license is required for mortgage loan officers, while loan officers of many types can benefit from voluntary certification from organizations like the Mortgage Bankers Association and the American Bankers Association, according to the BLS.