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What Is Underwriting and How Does It Work?


It is worth looking into short-term loans such as payday loans if you have come across unexpected costs such as a car maintenance bill or a veterinary bill for your pet. As part of the process of getting your loan, you may have to go through the underwriting process.

Underwriting can happen for all types of loans and it is how the direct lender who provides the loan gets to understand your financial history and what kind of loan they can offer you. It is usually the final stage of your loan process before you are officially approved for your loan. This also applies when you apply to borrow money online in any form, such as installment and bad credit loans.

Kallyss has made this guide so that you can fully understand what underwriting is, how it works and how it will affect your loan process.

How Does Underwriting Work?

Underwriting is the process in which the lender verifies the information you have provided on your loan application. This is both your personal details and your financial history. The underwriting process verifies your income, property, address, debt and personal details so that the lender can be sure that you are eligible for the loan that they are about to give you.

You will go through the underwriting process whether you have a good or bad credit score. It also doesn’t matter how much you are looking to borrow. Whether you need to borrow $1,000 or just need a $500 loan today, some degree of underwriting is inevitable and is always necessary from the lender’s perspective.

Underwriting usually happens without you even knowing but sometimes if something comes up the lender might want more information and then you will be brought into the process in order to provide additional documents that they might need in order to verify your information.

What Does An Underwriter Do?

An underwriter will take a look at your finances and assess how much of a risk it is for the lender to accept your loan application. Underwriting is most common for mortgage applications where the underwriter can help the mortgage lender understand if you will be able to make mortgage payments on time and will stop you from closing on a mortgage that you cannot afford and will not be able to pay back.

The underwriter can assess your ability for the loan in various ways; this includes investigating your credit history. An underwriter will carry out a credit check to check your credit score and understand your past financial history.

On your credit score there is all the missed repayments from previous loans, any outstanding debts that you have and any applications that you have made to other loans elsewhere. They look at your overuse of credit to see if you are eligible for this loan.

The underwriter will also verify your income and your employment; they will usually ask you to prove your employment status and prove that the amount you say that you earn is actually true. If you are making a mortgage application then they will also do an appraisal of the property to make sure that the two values line up.

An underwriter will more than likely look at your debt to income ratio as well. An underwriter examines your debts and compares them to your income to ensure you have more than enough cash to cover your monthly loan repayments, taxes and insurance.

How Long Does Loan Underwriting Take?

The amount of time that underwriting take truly depends on a case by case basis. Like any loan application, if you provide all the correct information at the beginning of the process then it will be much quicker and you will have the loan faster. If there are additional factors to consider, such as loan guarantors and other additional considerations, the underwriting process may take longer as there will be more to assess by the lender.

However, if the underwriter has sufficient information around your loan application and your details, as well as any additional documents, then your underwriting process could be much faster. With Kallyss you can have a payday loan in your account within 1 working day, or the next business day as long as you provide all the necessary information on your application form when you apply for the loan. Many lenders can also provide an instant decision and quick funding based on fast underwriting processes, so long as they have all they need.

What Can I Do to Help The Underwriting Process?

There are a few things that you can do during the underwriting process to make sure it goes smoothly for you and that you have your loan as quickly as possible. These include:

  • Providing all the correct information and be honest – It is important that during your loan application process that you provide all the correct information and that you are sure that you will be able to repay your loan. This will make the underwriter’s job much quicker when checking your information
  • Not applying for any other loans or credit lines – Applying for other loans or other credit lines during the underwriting process will make you look as if you are desperate for the money and that you do not have the money to repay your loan. This will make the underwriter suspicious that you are right for the loan. Even just applying for a $100 loan at the same time as another can delay the underwriting process
  • Respond to your underwriter quickly – If your underwriter has a problem and needs more information from you, it is vital that you reply quickly and with the correct documents so that the process can go as smoothly as possible