Nowadays, the process of approving and granting loans needs to be faster and easier than before to cater to the needs of new-age borrowers. The systems that support these loan management processes need to be more scalable, agile and equipped with the capabilities required to simplify the loan process and cut through the competition faster.
Furthermore, with the increase of smaller lenders, startups, peer-to-peer lenders, and digital lenders in the lending industry, to be at the top of the game, you need loan management software to eliminate the challenges faced in the loan process and help you digitize the complete flow. But not any system; you need the best digital solution for your business.
Do you know how the correct Loan management system can help you address these challenges? Don’t worry; we can help you with that.
Let’s start by answering some important questions first.
What is a loan management system?
When lending businesses want to streamline the complete lending process from borrowers’ applications, and verification to disbursal of funds, or rejection of the application, they use a loan origination system. However, when lenders need to manage, process, and collect payments, they use a loan servicing system.
A Loan management software is a system that manages both the origination and servicing processes, delivering operational efficiencies, improving your customers’ service function, increasing collaboration between teams, and providing transparent and complete reporting and analytics integration.
What are the challenges in the loan management process flow?
Before getting into these challenges, we need to be clear about what the steps in the flow of a loan management process are.
The loan origination is the first and critical step in the loan process. The steps involved in this process include:
- Submission of applications. Every new deal begins as an application submitted by a referral source to the lender. A processor then reviews this application at the beginning of the underwriting process.
- Underwriting. Here, the underwriter verifies the credentials of the borrower, their credit scores, bank balances, and any documentation that is needed to approve the application.
- Send offer. If the application is accepted, the lender sends an offer to the referral sources for them to determine the commission they would like for this offer and configure the proposal to the client’s liking.
- Approval of loan. The lender makes the funding call to approve or reject the borrower’s loan application.
Every other step that takes place after the disbursement of funds until the complete payment of the loan is provided enters under the Loan Servicing stage.
During this process, lenders face several challenges that need to be addressed to provide a faster and more efficient lending system, especially now that borrowers have lots of different options to choose from in the lending space. Now, what are these challenges?
- Long loan applications: As seen from the loan process, loan applications can take a long time, and with the digital revolution, companies must ensure that everything gets processed quickly by streamlining the process, optimizing the loan life cycle, and capturing the applicant information quickly.
- Manual verifications: saving time is of the essence in this process, and checking a borrower’s background, verifying the applicant’s credit worth and financial strength, and getting all the necessary documentation from the borrower can be a tiresome task if not handled properly.
- Poor customer experience: Nowadays, everything is about providing a superior customer experience. With the rise of digital lending businesses, borrowers have many options from where to choose that can provide an easier onboarding process, with a faster loan lifecycle, and that will allow them to complete the loan process across any device. The new millennial customers are looking for comfort and speed.
- Multiple applications management: for lending companies, it is pretty common to juggle several deals at a time, and if a company is looking to stay ahead of its competitors, it needs to be able to manage each application equally and provide the best customer service to each of them. However, managing multiple applications at once and being able to keep track of each one of them can be a hassle if you don’t have the right tool to help you handle it.
- Lack of growth: Every company’s goal should be to grow and evolve as time passes. There is nothing more damaging for a business than staying behind the times, not taking advantage of current trends and technologies, or not allowing their companies to grow and be scalable as the world evolves in the new digital age.
How can loan management software help address these challenges?
Having a top loan management platform can help lending companies not only by assisting them in reaching their short- and long-term business goals but also by simplifying their loan process and increasing their loan processing efficiencies. But how can it facilitate the flow of a loan management process?
- Automated loan processing. By streamlining and automating the entire loan process, lenders can get flexible and intelligent workflows that can speed up the decision-making capabilities, reducing time to market and generating faster loans while also enabling paperless boarding.
- Scalable support. Not all loan software provides scalability, but the correct loan management system can help a lending business grow and upgrade as the evolving market needs it. With scalable software, lenders can diversify their products and services and have a tool that considers the business’s long and short-term goals and infrastructural capabilities.
- Verification. The loan management software facilitates the customer verification process, which can be done within minutes. Especially if your Loan software has the range to integrate with applications that are built to run background checks, generate bank statements, and provide the borrower’s credit score in one platform.
- Customer experience. Good loan management software provides an easy way for borrowers to engage with lenders and different options for applying for a loan. This gives borrowers the flexibility to submit their applications anywhere, anytime, and anyway. Without the need for physical movement, a digital loan system brings a sense of comfort and engagement choices to the customer.
- Data submission. Bringing in data from different sources to your platform is also a plus from turning to loan software, which will help lenders make faster decisions and accelerate the verification process. Furthermore, these platforms can aid lenders in analyzing the data faster so they can track customer behavior better and understand the industry’s trends to market to new opportunities.
- Multiple submissions. An LMS allows lenders to manage multiple submissions simultaneously, handle the verification and document submission, track applications in pipelines to make sure deals are pushed forward, and speed up the loan process so that lenders can look for new opportunities for their businesses.
To sum up
By using the correct loan management system for your lending business, you can reduce the overall time required for processing the submission from lead management to closing the loan origination cycle.
Additionally, with a faster response time and multichannel communication system provided by the LMS, lending companies can offer better customer service, improve transparency within the organization, as well as with the borrowers and spend more time bringing more deals to the pipeline.
If you are looking for loan management software that can help you dissipate the challenges of long loan process flow, Cloudsquare, a Salesforce consulting partner specializing in alternative business lending, can assist you with this.
Cloudsquare offers a suite of products, such as FundSuite, designed to help financial service companies in the lending sector achieve their long-term goals, and accelerate their business by streamlining their origination, servicing, and syndicating needs, as well as their referral source management.