One of the aspects which the bank is guided by when issuing a decision to grant or refuse a loan is the borrower’s financial standing . This concept is not so difficult but very complex. It has many components, which only when combined with each other decide about the actual financial situation of the borrower.
Not only credit history matters
When assessing the applicant’s creditworthiness, the bank is required to verify it at the Credit Information Bureau. There, he checks whether the potential borrower has repaid all his previous liabilities or whether he repays current payments. In addition, the Bank obtains information from BIK whether we are complying with the loan agreement. It is all about whether we repay the loan installments on time. Not only the fact that the debt is repaid has an impact on our creditworthiness, but also whether we regularly repay the loan installments, within the deadlines set out in the contract. A positive assessment in BIK does not prejudge whether we will receive a loan. The final decision is always made by the bank, which also attaches great importance to the financial situation of the borrower.
Financial condition of the borrower
As we said, the borrower’s financial situation consists of many things. First of all, with most loans, the bank is interested in whether we have any source of income. If their origin is so important, i.e. whether the funds come, e.g. from a contract of employment, pensions, annuities, rent, lease, business activity, farm, etc. . This fact is particularly important when the only collateral for the loan is the borrower’s income. The borrower’s financial standing is not just about earnings. It is also important how much we spend and how much our previous commitments are. It is all about how much we spend monthly on our maintenance (rent, utilities, car operation). The borrower’s financial position is also affected by the amount of previous liabilities under previous loans, borrowings, credit cards and debits. When showing your obligations, please also indicate the amount of any maintenance obligation. When assessing the borrower’s financial standing, the bank also takes into account the number of dependents. These are the most important elements that, when combined, give us a picture of the borrower’s current financial situation.
The bank grants a loan based on all the above-mentioned elements. Even if theoretically we have a good credit history and our financial standing is at the appropriate level, the bank is not obliged to grant us a loan. Creditworthiness is necessary, but it is the bank that makes the final decision.