For many when they think of the lenders perspective of making a loan, they often think about a group of people sitting in a smoke filled room making decisions about who they will loan money to based on whatever the current economic conditions are. While this is somewhat true, lending is about assessing risk, meaning judging your risk to repay the loan back to the lender. The last thing in the world that any lender wants is to have is for you default on your loan to them. Instead, they would rather verify that you have the ability to repay the loan using a series of tests or standards to determine those who are worth the financial risk. Below are some of criteria that they use to decide if it is worth the risk to loan you money.

Credit rating: Most lenders will look at your overall credit score to see if you would be the kind of person that they are willing to make a loan to. They would look at factors such as how many loans do you currently have, if you are paying those loans off on time, how much credit card debt you have and has there been any previous write offs from another creditor who was not able to collect from you all play a role in determining if they should loan you the money. The more consistent you stay with making your loan payments, keeping up with your credit card bills and not have any outstanding balances with any creditors the greater your chance you will have of receiving the loan.

How much money do you make: This plays a major role in deciding if you will qualify for a loan. What lenders are looking for is how long you have been making your current annual income (usually most lenders will look at your tax returns and other information going back three years); if you have any judgments against you that could affect your income, what your current financial assets are, and how much of your income is free cash flow. This will help them to determine your financial ability to repay the loan.

While there is much more that goes into determining what a lender sees when they loan you money. Two main factors that they pay close attention to are your credit rating and how much money you make. These two factors speak volumes about what kind of borrower you are and about your ability to repay the loan.