A loan officer works in institutions like banks, credit unions, building societies and other financial companies to work with personal and business clients in obtaining loans.
The loan officer collects and verifies credit histories and financial documents to determine whether a loan applicant has the required level of creditworthiness, and manages the loan pipeline from application to transfer of funds, all the way through until the debt is repaid.
Choosing the right candidate to be a loan officer can be a challenge for recruiters. While most loan officer applicants will have a relevant degree or experience, there are other less tangible clues to the potential success of a candidate. These skills and abilities are less visible on a CV or application form, but they can make the difference between a successful hire and an expensive mistake.
In this article we will look at these skills and abilities, and how best the recruitment team can test them to make the application process run smoothly and cost less in the long term.
What should a loan officer be able to do?
The loan officer works mostly with customers who are looking to apply for a loan, and during that process, the loan officer needs to be able to provide advice, knowledge and information about the different credit and loan options available, as well as complete affordability and credit checks.
The loan officer will meet with the applicant initially to discuss options, including any new types of loans or different ways of raising funds. The loan officer will then collect all financial information, and analyze it along with property and credit evaluations. They may need to refer the details to credit analysts.
Once the loan is approved, the loan officer needs to check the agreement is complete and accurate, according to policy and the legal framework. They will need to calculate repayment options, including amount and frequency, to be able to estimate when the loan will be paid off.
During the time that the loan is active, the loan officer will need to maintain records of the loan and other details, and keep in touch with the borrowers.
If there is a problem with the repayments or the loan becomes delinquent, the loan officer is responsible for contacting the borrower to arrange for the outstanding balance to be paid in full or arrange an installment plan. If this does not work, then the loan officer will prepare a report to write off the debt to a collection agency.
Alongside the work of providing a loan, the loan officer might also help with other financial advice, minimizing overspending and selling other bank products that might help the situation of the customer. They are also likely to be the first point of contact for a customer that wants to make a complaint.
Skills to look for in a loan officer
When hiring a loan officer, recruiters usually look for a degree in something related to finances, or relevant experience, but there are some skills that a successful loan officer needs that are not so easy to find on a CV or in an application form. Some of these skills include:
Software - Accounting, CRM, Microsoft Office: the loan officer will work in different software programs depending on the work they are doing at that time, so skills in accounting software, as well as Customer Relationship Management (CRM) and the popular Microsoft Office suite, will be useful. Even for institutions that use bespoke computer packages, a candidate who is comfortable using some software can usually transfer that skill elsewhere.
Active listening: working with the public, especially when they are trying to get a loan, means being able to really listen to them and what they want. Giving the right advice and making the best recommendations comes from really knowing what the client wants - and loan officers need active listening skills to get that information.
Critical thinking, judgment and decision making: although many institutions have specific criteria for loans (which are backed up by online algorithms that do not allow for human interruptions), a loan officer needs to be able to think critically about the situation of the applicant, and then use their best judgment to make a decision about what type of loan to offer a customer.
Mathematics: anyone working in the financial sector needs to be skilled in mathematics. This is more than just solving equations though; a loan officer needs to be able to calculate affordability, interest rates and repayment terms.
Service orientation: working directly with the customers of the bank or other financial institution means that the loan officer must be ready and willing to provide a good service. This includes giving excellent, actionable advice and recommending loan or credit products based on their knowledge of the applicant.
Useful abilities for a loan officer
To hire a qualified and skilled loan officer, recruiters also need to look out for certain abilities. These are aptitudes that occur naturally in some people, and make them more suitable for a role as a loan officer. Some of the abilities a recruiter should look for in a potential loan officer include:
Oral comprehension and expression: to communicate effectively with loan applicants and colleagues, a loan officer needs to speak clearly and understand the words that other people are saying.
Written comprehension and expression: loan officers need to compile lots of information from customers, and be able to extract useful information from them. They can only do this effectively if they have a high level of ability in written comprehension. The loan officer will also have to create reports and other documents, which requires a large degree of ability in writing.
Inductive and deductive reasoning: working with finances and approving loans is not something that should be done without logic, and a good loan officer is able to think clearly and logically about all the information presented before making a reasoned decision.
Mathematical reasoning and number facility: a loan officer needs to be comfortable working with numbers; not only to complete calculations but to use different financial figures and other data in the form of numbers comfortably and confidently.
Selective attention and information ordering: loan officers deal with a lot of information in deciding if an applicant has an acceptable risk for a loan, and they need to be able to order it logically - and pay attention to it when they are looking for the details that they need to make a decision. The ability to pay attention even when there are distractions is very important for a loan officer.
Which soft skills tests could I use to hire a loan officer?
When recruiting for a loan officer, certain skills are considered to be soft skills, and these are the competencies that a candidate is not likely to list as a qualification or achievement in their CV or application form.
These soft skills can be tested, however, and for a potential loan officer some of the soft skills assessments you could use as pre-employment screening assessments include:
Accountability: the loan officer is responsible for deciding if an applicant can have a loan, and they will be held accountable should problems crop up in the future (like missed payments). They also need to be accountable for completing and maintaining records, and ensuring that company policy and legal frameworks are adhered to.
Communication: communication skills are not just about how well a candidate can speak, but also about how well they can listen to others, how they can empathize, and how they give and receive information.
Decision making: being a loan officer is all about making that big decision - whether the applicant is able to have a loan. Decision-making skills are not just about saying 'yes' or 'no', but also about using all the available information to make a logical and rational decision.
Teamwork: loan officers work as part of a wider team in a financial institution, so they will need to be adept at working as part of a team for future success. They may have to liaise with underwriters, credit analysts, customers, creditors, and even debt collection agencies.
Time management: loan processes can move slowly, but that does not mean that there is not a lot of work to do in the meantime. The loan officer might have to manage the time of their subordinates should they be in a management role. Time management is a skill that ensures all work is completed, on time, and to the right standards.
Which technical or aptitude tests could I use to hire a loan officer?
The technical and software skills that a candidate for a role as a loan officer might need are usually based on bespoke financial systems built for the business, and some of these are likely to have qualifications or certifications.
For other aptitudes and abilities, the tests that would be most relevant for a recruitment officer to use for hiring a loan officer include:
Numerical reasoning: the application of mathematical knowledge in a practical sense is what is tested using a numerical reasoning assessment. While some basic maths knowledge is needed to answer the questions, it is more about using maths to solve a problem.
Verbal reasoning: a loan officer needs to be able to read, understand and analyze written information from various sources, including sometimes complicated financial documents. In this assessment, a candidate demonstrates that they can draw reasoned conclusions from unfamiliar written information.
Situational judgment: making decisions in changing situations is not always easy, but a loan officer needs to have good situational judgment to be successful. In this assessment, the candidate will demonstrate their work behaviors and how they solve problems.
Error checking: working with the finances of a customer means that a good eye for detail is essential for a loan officer. The error checking assessment is about spotting errors or differences under pressure, just as it would be in the real world.
Logical reasoning: loan officers need to work in a logical way to make rational decisions, and they need to be able to reason with logic rather than through emotion to be successful. This assessment shows that they can take all information into account to spot patterns and make decisions.
Our recommended test battery for a loan officer
The tests mentioned above are all very useful in assessing the different skills and abilities that a candidate would need to be successful in a role as a loan officer. However, administering that number of tests to every candidate puts a burden on the resources of the recruitment team, and could be off-putting for the applicant too.
Our recommended test battery for a loan officer looks at the key attributes and competencies for a more streamlined pre-employment assessment.
Communication: in the communication assessment, the candidate is presented with questions in the form of work-related scenarios. Each scenario is a problem that requires some communication to solve. The candidate must choose the action to take to solve the problem from the multiple-choice options available.
Numerical reasoning: in the numerical reasoning assessment, the candidate is presented with questions that are based on numerical data in tables or graphs. To answer the question, the candidate will have to perform some basic mathematical operations, including percentages and ratios.
Decision making: based on a series of realistic scenarios, each question in this assessment is designed to see how a candidate makes decisions. They must choose the most appropriate course of action for the problem that is presented in the scenarios.
Error checking: in the error checking assessment, the candidate is given two sets of seemingly identical information, and they need to spot the differences between them. The data might be something like names and addresses, or numerical.
For more information about hiring a loan officer, we have created a job knowledge test specifically for those looking to hire a candidate for this role. The job knowledge test is based on personality, soft skills, and aptitudes.