Detailed Analysis of Credit Application Process: FNSCRD301 Finance

This document offers a detailed analysis of the FNSCRD301 assignment, focusing on the credit application process. It covers the responsibilities of credit officers, including considering customer needs and ensuring informed decisions. The assignment explores credit granting procedures, emphasizing the importance of assessing a borrower's capacity to repay loans. It also examines the significance of organizational risk policies in protecting lenders and the need for account monitoring to identify potential financial changes. Additionally, the document discusses communication strategies with borrowers, the importance of secure data storage, and the steps to improve loan application quality. The assignment references key aspects such as the 5 C's of credit, financial statements, and the use of email for efficient communication. Overall, the document provides a comprehensive overview of the credit application process, highlighting essential practices for financial institutions.

FNSCRD301 PROCESS
APPLICATIONS FOR
CREDIT

ACTIVITY: 1
Credit officers must consider the following special needs of the customers:
 Providing them with the information necessary to make an informed decision.
 Ensuring that the financial status of the customer is capable of meeting the interest
payment on the borrowed amount (Credit Granting Procedure. 2021).
 Credit officer must consider for what purpose that credit has been obtained.
 Also, the information must safely store in the database of the organisation.
ACTIVITY: 2
The term not unsuitable with regards to the customer contract needed to be ensured by the credit
provider so as to not suffer at the time of repayment of the credit and that the contract must meet
the requirements and objectives of the credit providing organisation. A credit will be not
unsuitable if:
 The borrower do not face any hardships while repaying the loan.
 Meet the requirements and objectives of the customers.
ACTIVITY: 3
Credit officer must ask for the personal information such as employment and financial
documents as per the organisational procedure and other additional information required for
larger amounts. By asking for references such as bank and trade references, appropriate
verification can be done for the clients. Financial statements facilitate justification of information
provided in the credit application.
ACTIVITY: 4
Among the 5 c’s of credit, capacity indicates the ability of borrower to pay back the loan amount.
It is measured through establishing comparison between income and business’s ability of the
borrower against the loan amount outstanding. The cash flows generate by business of the
borrower is also taken into consideration in order to ensure the repayment of loan when it
becomes due.
ACTIVITY: 5
When a loan application is declined by the credit officer and then the customer receives
intimation of the same (Digital Intelligence for Financial Services. 2019). So, to improve the
quality of loan application and ensure the acceptance of the same for the next time then the credit
officer must ask for some additional information by contacting the customer personally or
includes those necessary information like credit score of the customers or history of bank details
of the customers. In this way approval of the loan application can be obtained easily.

ACTIVITY: 6
In order to communicate with the borrowers, lenders should consider email as a source of
communication with customers as it is an instant form of communication channel, cheaper and
can be easily stored. It ensures no scope for disputes.
ACTIVITY: 7
The purpose of organisational risk policy is to protect the lender from unwarranted customers,
helps in maintaining risks of credit at a level that can be easily managed by the credit officer and
ensures earlier identification and avoidance of credit failure. As the organisational risk policy
provides with the authorization, checkpoints and information approval process, such risky events
can be avoided easily.
ACTIVITY: 8
All employees of the lender’s organisation are allowed to access the customer’s record in order
to serve them appropriately (Credit Application. 2018). Only authorized personnel should be
allowed to access such customer’s record file and unrelated parties should be prohibited from
accessing electronic system to obtain customer’s file as per the Privacy Act.
ACTIVITY: 9
The account monitoring is necessary for credit customers as continuous monitoring allows for
earlier identification of unfavorable changes in the customer financial circumstances and along
with the credit risk can be identified on a timely basis. Information such as loss of employment
and health deterioration of the customers can be easily determined through account monitoring
which can have an unfavorable impact on the credit organisation.

REFERENCES
Credit Application. 2018. [Online] Available through: <https://cleartax.in/g/terms/credit-
application>
Digital Intelligence for Financial Services. 2019. [Online] Available through:
<https://www.abbyy.com/solutions/financial-services/credit-application/>
Credit Granting Procedure. 2021. [Online] Available through
https://www.accountingtools.com/articles/2017/5/17/credit-granting-procedure