How To Become a Loan Officer

Loan officers meeting with clients in office

Imagine: you want to go to college, your parents are thinking of moving to a new house, a friend of yours is starting a business and a sibling is headed out to shop at a car dealership. What do all of these activities have in common? More often than not, they all require the involvement of a loan officer.

A loan officer is someone who facilitates major decisions and transitions in people’s lives by connecting them to the financing they need. If you have a knack for numbers and a desire to empower others to invest in their dreams, you might consider starting the process of how to become a loan officer. First, explore the standard loan officer requirements and then begin working toward a finance degree from an accredited university. 

What Does a Loan Officer Do?

It’s challenging—if not impossible—to embark on a major venture like buying a new car or starting a new business without obtaining external financing. Around the world, credit is the lifeblood that allows the economy to grow and individuals to flourish. Loan officers are the professionals responsible for helping people and companies access the funding they need to fulfill their aspirations.

In practical terms, this means that these professionals are responsible for evaluating and authorizing (or rejecting) applications for loans. In some cases, a loan officer may recommend the approval of a loan if they do not have the authority to approve it outright. Here’s a quick look at the process that loan officers typically follow.

  • The customer or business submits an application for a loan, along with supporting financial documents to prove that they have the ability to repay the loan. In some cases, proof of collateral may also be required.
  • The loan officer follows a process called “underwriting” to review and verify the information on all financial documents. The officer scrutinizes the financial information to determine whether the applicant truly can repay the loan.
  • The loan officer must then decide whether to approve (or recommend approval) or reject the loan application.

Loan officers may need to interview the customer to obtain more information. At many financial institutions, these professionals use underwriting software to guide their decisions. In addition, it’s necessary to consider whether the loan agreement is in full compliance with all applicable federal and state regulations.

If the loan officer decides to approve the loan, they are responsible for explaining the terms of the agreement to the loan applicant. In addition to reviewing loan applications and making approval decisions, these professionals frequently act as salespeople as well. They may be responsible for promoting the financial institution’s products and services and soliciting new loan applications.

Careers for Loan Officers to Consider

As you might expect, the majority of all loan officers work for banks and credit unions. Loan officers who specialize in mortgage applications may work for either a bank (or other financial institution) or a mortgage company. Some loan officers work within real estate or at car dealerships, where they specialize in helping consumers secure loans for new and used vehicles or houses.

The job of a loan officer is largely an office job that typically requires a standard 40-hour work week. Note, however, that some professionals are expected to work overtime, depending on the company and the level of demand by consumers. Some professionals, particularly those who work outside the consumer loans field, may need to travel outside the office on occasion to meet with clients.

Recommended Courses for Aspiring Loan Officers

If you’ve decided that this career seems like the right fit for you, you can get started working toward it right away, even if you’re still in high school. Talk to your guidance counselor about adjusting your course load to suit your career goals. There are a variety of courses you can take to prepare for your future plans.

Some of the most helpful courses include mathematics, particularly statistics and pre-calculus. If your high school offers any economics or finance classes, these would be a good fit as well. You might also consider taking classes in computer applications, marketing, business law and entrepreneurship, if available. 

If you’re still in high school, you should consider looking for relevant after-school jobs and internships. For instance, you might find an entry-level position or internship at a real estate agency, car dealership, investment firm or sales agency.

As you approach your graduation date, it’s time to start thinking about your college applications. You’ll want to choose a university that boasts a strong business and management college, with degrees in areas such as finance, accounting and economics. Your finance-related degree program will teach you the fundamental skills you’ll need to become a loan officer, although it’s also a good idea to explore internship opportunities. 

After graduating, you may need to obtain a license and you might choose to pursue an additional certification. Even if you do decide to pursue a certification, you may be able to land your first job before completing the certification requirements. You can expect a period of on-the-job training when you first get your foot in the door of this profession.

Earning Your Finance Degree

After high school, the first major step in the process of becoming a loan officer is to earn your bachelor’s degree. There is no universal degree requirement for loan officers, although students should choose a degree in business and management. Professionals come to this field with a range of degrees, such as degrees in finance, economics and accounting.

A finance degree is particularly well suited to this career because it generally follows a comprehensive curriculum that instills competencies in a range of areas. Finance majors can expect to study topics such as the following:

  • Mathematics, with a focus on business statistics
  • Microeconomics and macroeconomics
  • Financial and management accounting, including a look at cost–volume–profit (CVP) analysis, the accounting cycle and the preparation and analysis of financial statements
  • Managerial finance and financial markets
  • The modern monetary system, including different types of banks such as central, traditional and “near banks”

Your finance degree will thoroughly prepare you to pursue a career as a loan officer. However, you may also decide to declare a minor. Minoring in a foreign language such as Spanish would be a smart move, as it may allow you to more easily communicate with a wider range of future customers.

Consider pursuing internship opportunities while in college; the student career services department on campus should help you with this. In addition to checking local financial institutions for internship opportunities, you may want to consider a real estate company if you have plans to specialize in mortgages.

Areas of Specialization for Loan Officers

As you work toward your finance degree, it’s time to start thinking about whether you would like to specialize in a particular type of loan. Many loan officers specialize in consumer loans, such as vehicle loans, personal loans and debt consolidation loans. Student loans are another possibility, along with commercial loans for businesses.

Other loan officers decide to specialize in mortgages. Mortgage loans are more complex than other types, such as debt consolidation loans. Mortgages require extensive documentation, and the loan officer must carefully scrutinize every detail.

Do Standard Loan Officer Requirements Include a License?

Only mortgage loan officers need to obtain a license, although you should double-check your state’s requirements, which are subject to change over time. The requirements for becoming a licensed mortgage loan officer can vary from one state to the next. Once you are able to meet these requirements, you can apply for licensure through your state board.

In general, you can expect to take pre-licensing courses and successfully pass an exam. You’ll also need to pass background and credit history checks. Some states may have additional requirements.

Should You Earn a Certification From a Banking Association?

Aside from the licensure required for mortgage loan officers, there is no mandatory certification requirement. However, some professionals may choose to pursue a voluntary certification to demonstrate their expertise and increase their prospects for employment and promotion. Various certifications are available through multiple institutions, among which the American Bankers Association (ABA) and the Mortgage Bankers Association (MBA) are considered the gold standard.

Certification requirements vary from one entity to the next. The ABA, for instance, requires applicants to take a number of ABA courses. In some cases, certification applicants may need to pass an exam or demonstrate a certain number of years of work experience.

Completing Your On-the-Job Training

Although a finance degree will give you the necessary foundation to pursue a career as a loan officer, it’s to be expected that new hires will go through a period of on-the-job training. The length and structure of these training programs will vary from one company to the next. Yours may be rather formal and highly structured, or it may be relatively informal and involve being paired with a senior loan officer who will serve as your mentor.

Your on-the-job training period is an opportunity for you to establish a professional reputation as a conscientious employee with a strong work ethic. Always arrive on time or a few minutes early, take notes when you’re being given instructions or extensive feedback and ask senior employees for tips on how to improve in your role. If you earn a reputation as a hard worker right from the start, you’ll be in a good position to climb the corporate ladder as the years pass.

Essential Skills and Characteristics for Effective Loan Officers

Some of the important skills of an effective loan officer are what you might expect, such as a knack for working with numbers. Others, however, may surprise you. For instance, did you know that it’s helpful to have a good sense of salesmanship?

The job of a loan officer isn’t only to determine whether a particular applicant’s loan would be a smart, calculated risk for the company—it’s also to sell the loan as a product, because banks and other financial institutions rely on loans and other lines of credit as a significant source of revenue. Other essential skills and characteristics that will be important for your career include the following:

  • Attention to detail – Expect to sift through reams of paperwork. It’s necessary to pay close attention to each detail in order to assess the potential risk of the loan and the applicant’s creditworthiness.
  • Computer proficiency – Loan officers use sophisticated computer programs to aid their work in the banking industry. A proficient level of computer literacy is required.
  • Decision-making skills – The banking industry doesn’t thrive on indecisiveness. It’s important to be able to confidently make an informed decision.
  • Interpersonal skills – Although some loan applications are completed entirely online these days, loan officers do still work face-to-face with customers in an office setting. Interpersonal skills are essential because professionals must help their customers navigate the application process and must answer all of their customers’ questions.

Critical thinking and analytical reasoning skills are also important for aspiring loan officers, as is a good sense of time management. If you’re not sure whether you possess all of these skills and characteristics yet, not to worry! You’ll acquire them along the way during your time in college and your on-the-job training program.

The Colangelo College of Business offers a wide selection of relevant degree programs for future finance experts, including the Bachelor of Science in Finance degree program. Graduates will emerge with strong competencies in wealth management, banking, corporate finance and accounting.

Click on Request Info at the top of your screen to learn more about joining our dynamic learning community as a finance major.

The views and opinions expressed in this article are those of the author’s and do not necessarily reflect the official policy or position of Grand Canyon University. Any sources cited were accurate as of the publish date.