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Loan Officers and Counselors
Nature of the Work | Working Conditions | Employment | Training, Other Qualifications, and Advancement | Job Outlook | Earnings | Related Occupations | Sources of Additional Information
For many individuals, taking out a loan may be the only way to afford a house, car, or college education. Likewise for businesses, loans are essential to start many companies, purchase inventory, or invest in capital equipment. Loan officers facilitate this lending by seeking potential clients and assisting them in applying for loans. Loan officers also gather information about clients and businesses to ensure that an informed decision is made regarding the quality of the loan and the probability of repayment.
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; and mortgage loans are made to purchase real estate or to refinance an existing mortgage. In addition, banks and other lenders are offering a growing variety of loans. Loan officers must keep abreast of new types of loans and other financial products and services, so they can meet their customers needs.
In many instances, loan officers act as salespeople. Commercial loan officers, for example, contact firms to determine the firms demand for loans. If the firm is seeking new funds, the loan officer will try to persuade the company to obtain the loan from their institution. Similarly, mortgage loan officers develop relationships with commercial and residential real estate agencies, so when an individual or firm buys a property, the real estate agent might recommend contacting that loan officer for financing.
Once this initial contact has been made, loan officers guide clients through the process of applying for a loan. This process begins with a formal meeting or telephone call with a prospective client, during which the loan officer obtains basic information about the purpose of the loan and explains the different types of loans and credit terms that are available to the applicant. Sometimes, the loan officer assists the client in filling out the application and answers questions about the process.
After completing the forms, the loan officer begins the process of analyzing and verifying the application to determine the clients creditworthiness. The loan officer may request a copy of the clients credit history from one of the major credit reporting agencies, or in the case of commercial loans, she or he may request copies of the companys financial statements. Loan officers include this information and their written comments in a loan file, used to analyze the viability of the loan vis-à-vis the lending institutions requirements. At this point, the loan officer, in consultation with her or his manager, decides whether to grant the loan. If approved, a repayment schedule is then arranged with the client.
A loan that would otherwise be denied may be approved, if the customer can provide the lender with appropriate collateralproperty pledged as security for the payment of a loan. For example, when lending money for a college education, the bank may insist that the borrower offer her or his home as collateral. If the borrower were ever unable to repay the loan, the borrower would have to sell the home to raise the necessary money.
Once the loan has been granted, loan counselors, also called loan collection officers, may need to contact borrowers with delinquent accounts to help them find a method of repayment to avoid default on the loan. If a repayment plan cannot be developed, the loan counselor initiates collateral liquidation, in which case the collateral used to secure the loana home or car, for exampleis seized by the lender and sold to repay the loan. A loan officer can also perform this function.
Working as a loan officer usually involves considerable travel. For example, commercial and mortgage loan officers frequently work away from their offices and rely on laptop computers, cellular phones, and pagers to keep in contact with their offices and clients. Mortgage loan officers often work out of their home or car, visiting offices or homes of clients while completing loan applications. Commercial loan officers sometimes travel to other cities to prepare complex loan agreements. Consumer loan officers and loan counselors, however, are likely to spend most of their time in an office.
Most loan officers and counselors work a standard 40-hour week, but many work longer, depending on the number of clients and the demand for loans. Mortgage loan officers can work especially long hours, because they are free to take on as many customers as they choose. Loan officers usually carry a heavy caseload and sometimes cannot accept new clients until they complete current cases. They are especially busy when interest rates are low, triggering a surge in loan applications.
Loan officers and counselors held about 227,000 jobs in 1998. Approximately half were employed by commercial banks, savings institutions, and credit unions. Others were employed by nonbank financial institutions, such as mortgage banking and brokerage firms and personal credit firms.
Loan officers are employed throughout the Nation, but most work in urban and suburban areas. In rural areas, the branch or assistant manager often handles the loan application process.
Loan officer positions generally require a bachelors degree in finance, economics, or a related field. Most employers prefer applicants who are familiar with computers and their applications in banking. For commercial or mortgage loan officer jobs, training or experience in sales is highly valued by potential employers. Loan officers without college degrees usually have reached their positions by advancing through the ranks of an organization and acquiring several years of work experience in various other occupations, such as teller or customer service representative.
The American Institute of Banking, which is affiliated with the American Bankers Association, offers correspondence courses and college and university classes for students interested in lending as well as for experienced loan officers who want to keep their skills current. The Mortgage Bankers Associations School of Mortgage Banking also offers classes, both classroom and Internet-based, for people involved in real estate lending. Completion of these courses and programs enhances ones employment and advancement opportunities.
Persons planning a career as a loan officer or counselor should be capable of developing effective working relationships with others, confident in their abilities, and highly motivated. For public relations purposes, loan officers must be willing to attend community events as a representative of their employer.
Capable loan officers and counselors may advance to larger branches of the firm or to managerial positions, while less capable workersand those having inadequate academic preparationcould be assigned to smaller branches and might find promotion difficult. Advancement beyond a loan officer position usually includes supervising other loan officers and clerical staff.
Employment of loan officers and counselors is expected to grow faster than the average for all occupations through 2008. Job growth will be driven by an increasing population, expanding economy, and low interest rates, which will lead to more applications for commercial, consumer, and mortgage loans. Growth in the variety and complexity of loans, coupled with the importance of loan officers to the success of banks and other lending institutions, should also assure employment growth. Although increased demand will generate many new jobs, most openings will result from the need to replace workers who leave the occupation or retire.
Employment growth will be tempered by several factors. First, refinancing of mortgages, a major contributor to the recent growth in the number of loan officers, is expected to diminish, because people who needed to refinance have already done so. Also, computers, underwriting software, and communication technologies are making loan officers more productive. They can now spend more time in the field with prospective clients, while still keeping in touch with the office. Also, qualifying applicants for loans is being made easier with computers performing much of the analysis. The Internet is also expected to slightly dampen the demand for loan officers, as a growing number of people apply for loans online.
Employment of loan officers is subject to the upturns and downturns of the economy. When interest rates decline dramatically, there is a surge in real estate buying and refinancing that requires additional loan officers specializing in mortgage financing. When the real estate market returns to normal, loan officers can be subject to layoffs. The same applies to commercial loan officers whose workloads increase during good economic times, as companies seek to invest more in their businesses. In difficult economic conditions, loan counselors are likely to see an increase in the number of delinquent loans.
Even in economic downturns, however, loans remain the major source of revenue for banks, so the fundamental role of loan officers will contribute to job stability. Moreover, because loan officers are often paid by commission, the bank may retain them simply by paying less compensation. As in the past, college graduates and those with banking, lending, or sales experience should have the best job prospects.
Median annual earnings of loan officers and counselors were $35,340 in 1998. The middle 50 percent earned between $26,380 and $50,240. The lowest 10 percent had earnings of less than $20,990, while the top 10 percent earned over $82,270. Median annual earnings in the industries employing the largest number of loan officers and counselors in 1997 were:
The form of compensation for loan officers varies. Most loan officers are paid a commission that is based on the number of loans they originate. In this way, commissions are used to motivate loan officers to bring in more loans. Some institutions pay only salaries, while others pay their loan officers a salary plus a commission or bonus, based on the number of loans originated. Banks and other lenders sometimes offer their loan officers free checking privileges and somewhat lower interest rates on personal loans.
According to a salary survey conducted by Robert Half International, a staffing services firm specializing in accounting and finance, residential real estate mortgage loan officers earned between $31,600 and $47,000 in 1998; commercial real estate mortgage loan officers, between $46,000 and $74,000; consumer loan officers, between $30,000 and $49,000; and commercial loan officers, between $38,400 and $85,000. Smaller banks ordinarily paid 15 percent less than larger banks. Loan officers who are paid on a commission basis usually earn more than those on salary only.
Loan officers help the public manage financial assets and secure loans. Occupations that involve similar functions include securities and financial services sales representatives, financial aid officers, real estate agents and brokers, and insurance agents and brokers.
Disclaimer: Links to non-BLS Internet sites are provided for your convenience and do not constitute an endorsement.
Information about a career as a loan officer or counselor can be obtained from:
State bankers associations can furnish specific information about job opportunities in their State. Also, individual banks can supply information about job openings and the activities, responsibilities, and preferred qualifications of their loan officers.
An industry employing loan counselors and officers that appears in the 2000-01 Career Guide to Industries: Banking
Last Updated: March 30, 2000
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