Loan Application Evaluation Scenario

Evaluating loan applications involves a careful analysis of key financial indicators tied to an applicant. Two primary metrics stand out: the applicant's credit score and their debt-to-income ratio. The credit score reflects past financial habits, while the debt-to-income ratio reveals how much of an applicant's income is already committed to existing debts.

Together, these figures give lenders a comprehensive view of an applicant's financial health and ability to repay. By combining this information, financial institutions can make well-informed lending decisions, balancing their own security with the needs of the borrower. The final step is clear communication with the applicant, reinforcing the institution's dedication to clarity and trustworthiness.

What We Will Do:

Collecting Applicant's Information

Capture essential applicant details such as email, phone number, full name, age, location and current job.Validate the provided information for completeness and accuracy to ensure a reliable foundation for the subsequent loan evaluation steps.

Credit Score Verification

• Data Gathering: The system will request the applicant's credit score.

• Validation Process: With FlowOn Logic will validate if the provided credit score is a numerical value. The accepted range for most credit scores is typically between 300 and 850.

  Credit Score Range	Status
  300 to 579	Poor
  580 to 669	Fair
  670 to 850	Good

Analyzing Debt-to-Income Ratio

• Data Gathering: Monthly Debts (Includes monthly obligations like credit card payments.) and Gross Monthly Income: (Total income before any deductions.)

• Calculation Process: The ratio is determined by dividing the total monthly debts by the gross monthly income.

  Debt-to-Income Ratio = Total Monthly Debts / Gross Monthly Income.

  Debt-to-Income Ratio (%)	Interpretation
  0% to 20%	Excellent balance between debt and income.
  21% to 35%	Good balance but indicates moderate use of income towards debts.
  36% to 49%	Fair; hints at potential financial strain.
  50% and above	High; significant part of income goes to debt.

Loan Eligibility Determination

The loan eligibility is primarily ascertained by utilizing two key metrics: the validated credit score of the applicant and the computed debt-to-income ratio. A decision table in FlowOn Logic will cross-reference the provided metrics with the institution's lending criteria. For instance, applicants with a debt-to-income ratio of more than 0.40 and a credit score below 600 might be flagged as high risk.

Credit Score Range	Debt-to-Income Ratio Range	Loan Eligibility Result
300 to 599	0.41 to 0.60	Denied
600 to 850	0.00 to 0.40	Approved

Communicating the Decision: Building the Flow

Based on the processed data from the previous steps, a final decision regarding the loan application will be made. This ensures immediate feedback, allowing applicants to be informed promptly about the status of their loan request.