Loan officers work at banks, credit unions, or other financial institutions assisting customers in applying for loans and assessing their creditworthiness through a process called underwriting, where they agree to take on the financial risk for a fee. They determine the type and amount of loan that is most suitable for their customers' needs.
Loan officers tend to specialize in one of three major types of lending: commercial, consumer, or mortgage. Commercial lending is the extension of credit to businesses. Consumer lending includes personal loans, education loans, home equity loans, and auto loans. Mortgage lending includes loans for the purchase of real estate by individuals—a business normally would be served by a commercial loan officer, even for real estate purchases—or the refinancing of existing mortgages.
Loan Officer Duties and Responsibilities
This job generally requires the ability to do the following work:
- Meet with loan applicants to gather personal information and answer questions to evaluate their loan application and risk
- Explain to applicants the types and terms of each loan to determine a loan that is suitable for their specific needs
- Track and maintain credit and loan information
- Seek out new clients by contacting companies and people
- Work with existing clients to strengthen relationships, encourage referrals, and enhance your reputation among others seeking loans
- Work with borrowers who fail to make their loan payments on time
- Use loan underwriting software to make recommendations to customers
The majority of loan officer positions combine sales with analytic responsibilities, selling loans while determining appropriate clients and terms. Some positions are focused largely on the analytics, with no sales dimension and limited client contact. People in these types of jobs are sometimes called loan underwriters.
Other positions specialize in dealing with clients who are having problems meeting their payments. One example is a loan collection officer, who tries to work out agreements with troubled borrowers by adjusting the repayment terms.
In assessing the creditworthiness of loan applicants, loan officers judge customers' suitability as borrowers and the precise terms of the loan, such as interest rate and repayment schedule, on which credit may be granted. Depending on their position, a loan officer may be expected to actively seek out clients, rather than passively wait for applicants to approach their business for credit.
Loan Officer Salary
A loan officer's salary may vary based on their level of experience, area of concentration, and education, according to 2018 data from the U.S. Bureau of Labor Statistics:
- Median Annual Salary: $63,040 ($30.31/hour)
- Top 10% Annual Salary: $132,080 ($63.50/hour)
- Bottom 10% Annual Salary: $31,870 ($15.32/hour)
Compensation schemes vary by employer, with varying mixtures of salary and commission. Where commissions are paid, they normally reflect the number or value of loans originated. The highest pay packages tend to be commission-based and at large institutions. If the compensation scheme is largely commission-based, there is a close correlation between performance and reward, with high earnings potential.
Education, Training, and Certification
This career requires the following degrees, experience, and licenses:
- Academia: A bachelor's degree usually in a field such as business or finance is generally required. Coursework may include finance, accounting, or economics. A master's degree can make you a stronger candidate for hire, depending on the firm. Also, to be a commercial loan officer, you will need to analyze the finances of businesses applying for credit. Therefore, this position requires a solid understanding of general business accounting, including how to read financial statements.
- Certification: Most loan officer positions do not require any special certification or licensing. However, a notable exception is mortgage lending. Most states regulate this field, especially regarding positions in mortgage banks or mortgage brokerages, rather than in traditional banks or credit unions. To obtain a mortgage loan originator (MLO) license, applicants must complete at least 20 hours of coursework, pass an exam, and submit to background and credit checks. The American Bankers Association and the Mortgage Bankers Association, as well as a number of schools, offer courses, training programs, or certifications for loan officers. Although not required, certification shows dedication and expertise and may increase a candidate's chances of gaining employment.
- Training: Loan officers usually receive some on-the-job training. This may be a combination of formal, company-sponsored training and informal training during the first few months on the job.
Loan Officer Skills and Competencies
This position generally requires the following skills:
- Quantitative skills: Understanding mathematical and numerical data, which is important when working with numbers to determine a loan
- Good judge of character: Making accurate assessments about people, especially their credibility and their reliability, in determining a loan
- Interpersonal skills: Cultivating and strengthening existing customer relationships, as well as selling loans to new customers
- Verbal and written communication: Explaining loans to customers so they have a complete understanding of the terms
- Independence: Working independently if you have a large degree of professional autonomy
- Decision-making skills: Evaluating a customer's loan application and determining whether to award them a loan
- Mental stamina: Rejecting loan applicants who do not meet the institutions lending criteria or deal with clients who cannot repay their loans as agreed
According to the U.S. Bureau of Labor Statistics, employment of loan officers is expected to continue to grow 11% through 2026, faster than the average for all occupations. Although the demand for loan officers will increase as the overall economy grows, the decline of bank branches may moderate employment growth.
A consumer loan officer is most likely to work set hours from a fixed location, such as a bank branch or office. A commercial or mortgage loan officer often has to work variable hours to confer with clients at the latter's places of work or residence, and thus spend significant time out of the office and on the road.
The majority of people in loan officer jobs tend to work a standard 40-hour week. However, commercial or mortgage loan officer hours vary, as they may need to travel to client locations, which may require working at odd hours.
How to Get the Job
Join an organization such as the National Association of Mortgage Brokers (NAMB) or the American Bankers Association (ABA) to meet other industry members and stay current on industry practices. Memberships to these organizations can also lead to job opportunities.
Comparing Similar Jobs
If you are interested in a career as a loan officer, review these similar positions, along with their median annual salary:
- Financial Analyst: $85,660
- Financial Examiner: $80,180
- Personal Financial Advisor: $88,890
- Financial Manager: $127,990
- Insurance Sales Agent: $50,660
Source: U.S. Bureau of Labor Statistics, 2018