Finance is the backbone of every business enterprise. Be it diversification, expansion, or simply starting up, you need money to fund your business ambitions. This much-needed funding is provided by banks and financial institutions in the form of loans, which charge a pre-decided interest rate. A loan officer is usually hired by these institutions to evaluate the creditworthiness of the applicants and process their loan documents.
It is a vital and responsible position, which not only receives huge respect from society but also lucrative benefits and incentives. Thus, prepare sincerely for your interview session by reading several frequently asked interview questions. The best collection of such interview questions is mentioned below:
21 Best Interview Questions To Study
1. What Are The Various Documents That You Need For Evaluating A Loan Application?
This question evaluates how much are you aware of the various documents needed for processing loans applications.
Sir, evaluating a loan application is a tricky process, and the need for documents usually differ from case to case basis. However, below is the list for all the common documents that are required in almost every situation:
- The identity proofs of the loan applicant
- Income tax returns for the last three financial years
- Financial statements, such as Balance sheet, Income statement and Cashflow statement
- Bank statements of at least past six months
2. The Income Statement Of A Body Corporate Contains Several Bogus Expenses, Which Hint Towards Window Dressing. How Would You Deal With Such A Situation?
This is a practical situation based interview question wherein you are required to handle it in an appropriate manner.
Sir, claiming bogus expenses leads to creation of secret reserves, which reduces the profitability of an enterprise and consequently their loan taking ability. But, in the larger picture, these represent frauds and misappropriation of money, which ultimately impacts the ability of an enterprise to repay the amount granted as loan. In such a situation, I will hesitate, and conduct a deep scrutiny of all the financial statements, including the income statement. Further, I will grant a loan only when I am completely satisfied as to the security of the principal and interest.
3. A Home Loan Applicant Has A Bad Credit History, But His Current Financial Statements Are Authentic and Worthy Of Obtaining A Loan. React In This Situation.
This is a situation handling interview question, in which you have to use your intelligence and give a composed reaction.
Sir, credit histories are dependent upon and largely influenced by the past performance, financial statements and repayment behaviour of the loanee. The credit scores and history must be given due importance and acknowledgement, while disbursing any loan. Giving reliance only on the present financial statements is not justifiable in this situation, and If I were to handle this, I will reject the loan application forthwith.
4. What Do You Mean By M.C.L.R (Marginal Cost of Funds Based Lending Rate) and Why Was It Introduced?
This question tests your core principles of finance, and also your practical working knowledge.
Sir, M.C.L.R represents the base lending rate, below which the financial institutions are not allowed to lend to their customers. However, additions are made to this M.C.L.R by the banks considering their own calculations. Further, earlier the banks used to lend at the “base rate”, which gave an advantage to the regular and prime customers of the banks, as they were able to secure a loan at a cheaper rate. Thus, M.C.L.R was introduced to give a level playing field to all the customers of the banks.
5. What Do You Mean By The Principle Of Prudence?
As a loan officer, you got to have an excellent understanding of the accounting concepts and the various associated techniques. There will always be questions from this aspect that will test your theoretical domain knowledge.
Sir, “prudence” is an important concept using which business entities preparing their financial statements are required to recognize all their probable losses, which are expected to be incurred in the near future. This recognition is usually done by the creation of a provision, which acts as a charge against the profits. For example, a company which anticipates that 5% of its total sales will turn bad and no money will be received against it, tends to create a “Provision for bad debts” using the concept of Prudence.
6. How Many Types of Loans Are You Aware Of? Can You Name Some?
This question tests your practical working knowledge.
Sir, given the rapid evolvement of the finance sector, there are simply several types of loans that are disbursed by the business organizations for varied purposes. Some common types of loans are, Home Loan, Car Loan, Business Loan, Gold Loan, Personal Loan, Property Loan, Two-wheeler Loan, Education Loan, Rental Deposit Loan, etc.
7. What Do You Mean By Restructuring Of Loan?
This question tests your understanding of the various issues that loanees face during the course of their businesses.
Sir, business organizations operate in a dynamic business environment, which is marred by a variety of legal and political factors besides stiff business competition. The companies which are not able to keep up with this rapid pace, fall, and pose a serious challenge to their ability to service debt and associated interest. This spoils their financial position, and they request their lenders to restructure their loans in which the loan agreements and contracts are altered so as to provide some relief and breathing space to the defaulting organization. In restructuring, usually, the repayments are delayed, loan tenure is increased and interest rates are reduced.
8. Explain Any Three Accounting Principles In Brief.
This question tests your core accounting knowledge, which is pivotal to have in this job profile.
Sure sir, These are:
|Name of the accounting principle||Explanation|
|Going concern concept||Using this concept, it is assumed that, a business entity will continue performing business operations for an infinitely long time in the future. Its practical application is, Charging of depriciation over the useful life of the asset.|
|Matching concept||This concept states that all the expenses, which have been incurred to earn income for the period must be recognized in that same accounting period. For example, Salary paid for the month of April in the previous month, must be recognized in the next financial year.|
|Cost concept||As per this concept, a business organization shall record all the assets at their acquisition cost, and must not account for any subsequent rise due to inflation, or any other factor.|
9. How Will You Go “Extra Mile” While Being On Job Discharging Your Duties?
This question tests how much you value building customer relationships and being loyal to your organization.
Sir, while being on job, employees are the face of a business organization. Their every conduct, behavior and approach is deemed to be that of the company, and hence one must take care extra caution while discharging their duties. The customers must be enriched with some of the best professional behaviour, which not only gives them overall satisfaction, but also makes them loyal towards the financial organization. Further, “loan officer” is a critical profession, and one must not compromise in any manner, while discharging his or her duty.
10. Since Our Inception, We Have Always Believed In Delivering Quality Services To Our Customers. How Do You Interpret The Term “Quality”?
This is a word based interview question, wherein you are required to interpret the term “quality”, which is one of the most favorite corporate word. Usually, “quality” is achieved when employees are able to deliver performances that meet the established benchmarks and/or standards, besides delivering satisfaction to the customers. Be logical, and always share a structured response, in which, you first explain the meaning of quality (in your opinion) and than close it with a professional real life experience.
11. There Will Always Be Times When Things Will Not Go Your Way. How Do You Manage Workplace Failure?
Success is a dream, which is seen by everybody in this world. We all want to be successful, and enjoy that recognition, respect and popularity that follows a successful man. But, not all are lucky, and unfortunately, it remains a distant dream. It is an established fact that a failed employee never performs to the best of his ability. This ultimately impacts the business organization, and thus, an interviewer is always interested in knowing the strategies and techniques adopted by you to manage your workplace failures.
12. Loan Officer Is A Responsible Designation and You Will Be Held Highly Accountable For Your Actions. How Do You Manage Your Workplace Stress?
Being a critical position, a loan officer is a challenging designation. Even a small mistake in processing of the applications can impact the overall credit system adopted by the financial organization. Meticulous performance of so many functions on a daily basis can lead to stress and impact your working adversely. Thus, through this question, an interviewer wants to know how you manage your workplace stress.
13. What Are Your Strengths and Weaknesses As A Loan Officer?
This is a common interview question, which is asked in almost all the interview sessions held across the world. Through this question, an interviewer not only assesses your personality but also observes how much you know about yourself. The best way to answer this question is by analyzing your personality and the job description issued to you by your employer. Post this, you must share those strengths that relate to your major requirements for the job and weaknesses that do conflict with them.
14. There Is No Dearth Of Banks and N.B.F.Cs. But, Why You Want To Work With Us?
This question is asked with an intent to check your seriousness and commitment towards the business organization you sought to work with. The official website of every bank or N.B.F.C is the best way to prepare an answer for this question. From it, you can note down all the historical facts, achievements and accomplishments of the company. Add your personal interests to your answer and compile all the information to form a well-structured response.
15. As An Established Financial Institute We Will Assign You Several Tasks To Be Performed In A Working Day With All These Tasks Having Deadlines. How Do You Ensure A Timely Submission For All Of Them?
This question requires you to state your prioritization technique, using which you are able to order and arrange your tasks on a pre-defined basis. Most employees prefer to arrange their tasks on the basis of difficulty level, time consumption or associated urgency level. You are free to choose any technique, which suits you, however you must close your answer using a professional experience.
16. If You Were An Animal, What Will You Be?
This is a master personality evaluator question, which requires you to gain information about the positive traits and attributes of some corporate friendly animals, such as, elephants, dolphins, bald eagles, dogs, honey bees, etc. To create an ideal response, select your animal, and understand its positive traits that align with the requirements of this job. Post this, justify your selection by narrating a logical response.
17. We Know Employees Charge. What Are Your Salary Expectations?
It is common for the interviewers to ask about your salary expectations during an interview session itself. It is recommended that you always quote the salary in a bracket, which is based on some extensive market research of the industry to which you belong. While researching calculate the average salary offered to all the loan officers having a work experience similar to you and quote a salary braket on similar lines with a maximum deviation of 15%.
18. When Can You Start Working With Us?
This is a non-technical interview question, which requires you to share an expected date of start on or after which you can start working for the company. It is recommended that you always share a date after keeping a buffer of at least two days.
19. It Is Common For The Employees To Cave In Front Of Discipline and Daily Routines. How Interested Are You In Performing Repititive Tasks?
It is common for the employees to sense monotony due to daily routines and feel the heat of discipline. This creates a negative attitude and prevents them from delivering an exceptional performance. Hence, an interviewer is always interested in knowing and understanding your attitude towards performing repetitive tasks. This is a common expectation from the employees, and hence you must answer it positively.
20. We All Need To Have Some Motivation To Perform At Our Workplace. What Motivates You To Work?
We all are motivated by a few factors that prompt us to work hard and achieve our goals and objectives in a time bound manner. These motivational factors are largely influenced by the personal conditions, financial situations and circumstances of an individual. Hence, you must always share an original response, ignoring all the generic ones.
21. Do You Have Any Questions For Us?
This is the last question of every interview session, through which an interviewer wants to know about your apprehensions and doubts, which you might be having in regards to the business organization. It is recommended that you always attempt this question, as failing to do so would make you either an underprepared or a non-serious candidate. Thus, you must always ask a few relevant counter-questions from your interviewer based on the model questions mentioned below:
- What are the various incentives and allowances that are offered by the financial institution to its employees?
- What are the different security checks that are followed by the company before disbursing loans?
- Is it the policy of the company to offer paid leaves to its employees, especially during medical emergencies, such as paternity/maternity?
Download the list of questions in .PDF format, to practice with them later, or to use them on your interview template (For Loan Officer interview):
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