Loan Origination
IntermediateLoan origination is the process by which a lender creates a new loan, from receiving the application through checking the borrower, approving the loan, preparing documents and paying out the money.
Every loan goes through an origination process. It usually begins with an application, where the borrower provides information about income, employment, existing debts and the purpose of the loan. The lender then checks the borrower's credit history, verifies documents and assesses whether the borrower can afford the repayments, a stage called underwriting.
If approved, the lender sets the terms, such as the interest rate, term and any fees, and prepares the legal agreement. Once it is signed, the money is released.
For example, a mortgage origination might involve checking the buyer's payslips and bank statements, ordering a valuation of the property, approving a loan of 240,000 and paying the money to the seller's lawyer on completion.
Lenders often charge an origination fee to cover the cost of this work, sometimes as a percentage of the loan. Some lenders originate loans and keep them, while others sell them to investors after origination. Technology has made origination much faster for many types of consumer loans.
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