Reviewed by Sep 30, 2020| Updated on
A credit application is an application filed by a prospective borrower and submitted to a credit lender. A credit application can be submitted in writing either through online and offline modes or orally in person at the lender’s premises. A credit application should have all requested details, without which the lender will not be able to proceed with a credit application.
Some lenders may charge a fee to process credit applications. Irrespective of a home loan, personal loan, education loan, vehicle loan, loan against collateral, credit card, or any other form of loans, the aspiring borrowers must submit a credit application. These days, most credit applications are submitted online.
Consumers and enterprises, these days, have several credit lenders to choose from. The credit options just don’t stop at conventional banks and credit cards; individuals have the choice of availing credit from non-banking financial companies and emerging fintech companies that process credit applications within minutes from receiving. Also, like banks, they too offer several kinds of loans.
Generally, when a lender receives a credit application, the repayment ability of the applicant is assessed. This is done by checking the track record of handling debt via credit score and income being earned by the applicant(s). For collateralised loans, the security being offered is scrutinised carefully, and the lenders ensure that the applicant(s) is the owner. If discrepancies are found, lenders will not hesitate to reject the credit application.
For collateralised loans, the lender will closely analyse the security being offered and will make sure that the loan amount requested is recoverable by auctioning the same if the borrower(s) is unable to make the repayment.
The ownership of the security may be transferred to the lender over the loan tenure. However, the borrower will continue to have the possession. For an unsecured loan, no security is needed.