Important Factors to Consider Before Investing in Loan Origination Software in 2021
Important Factors to Consider Before Investing in Loan Origination Software in 2021 –
The loan lending companies are transforming to automation models from conventional loan processing models. Consumer needs and market trends are rapidly changing, where borrowers expect loans to be released in minimal time, just in single-tap. Such a level of sophistication to release loans is not possible with conventional systems that requires a long work process that are time, human-resources, and physical-space consuming.
In addition, the costs that an organization bears to maintain the work-flow is also at higher end. The intervention of multiple people at different stages of the loan-generating process puts both lenders and consumers, at risk with chances of frauds.
The best part is that technology has become advanced that not only wipe out maximum human process errors and scope of possible frauds, but also build a high-performing, and automated loan processing software that has the ability to process loans in minutes with low operational cost. Loan providing companies with conventional methods are transforming to thrive and dominate due to their low-cost operations and customer service.
However, to gain all these advantages, you need to know which loan origination software is perfect for your business.
To make this decision, Check out what are the important factors to consider before investing in Loan Origination Software in 2021:
1. Whether Features Are Automated?
Having an automated loan origination software (LOS) is important because it helps to keep better track of the whole origination process. With automation the data entry, rules-based decision, and risk calculations makes your system consistent and lowers the amount of time. Furthermore, your customers will receive decisions on their applications almost instantly after submitting their details.
Automated Loan origination software should include:
- Loan sharing
- Predictive models
- Covenant monitoring
- Collateral management
- Workflow assignments and monitoring
Some systems include extra automated features. When you communicate with the loan provider, ask for a complete list of all of the automated features.
2. Is the LOS Configurable?
A modern loan origination software system should meet your specific workflow requirements. Decision rules that improve workflow must be integrated with features to lend professionals the ability to configure the process to their unique requirements. Modifications can be performed as needed. Seeing today’s economy, it’s crucial to have the feature to configure the system and add new rules after the software is installed. The software should sync along with the business management.
3. Is Software Able to Handle Exceptions?
One of the important things to understand is lenders reject an application without knowing facts related to the potential risk. Some loan origination software systems reject these applicants having low credit history outright without providing any recourse. Rather, the software should flag the application for proper review or analyze it based on additional criteria. Software handling exceptions well will bring more customers and help you retain them for longer.
4. Possible Time for Return on Investment?
This is a tough question to answer as every LOS is different in operation. Still, you can contact the software vendor regarding the time it will take to implement the software based on your operations. Is the software designed is functional out of the box, or does it need customization depending on your workflow? Is it integrated with the option to test the basic version of the software and upgrade to complex system later? With faster deployment of LOS, the sooner you can enjoy the return on your investment. Ask vendor for time estimates depending on the business’ operational needs.
5. Whether the Software is Secure?
Whenever new software is introduced into your existing system or not, it is important to check whether it is secure to protect your business and your customers. This means select a loan origination software with features like:
- Multi-factor Authentication.
- Stores data securely and includes encryption where required.
- Locks down sensitive data with only authorized access.
- Is frequently patched and updated with latest security parameters.
The vendor must take security seriously and be committed to update the software on continuous basis.
How to Select the Right Loan Origination System?
A perfect loan origination software, would streamline the stages of a customer journey from origination to loan approval. Modern borrowers come across troubles when choosing lenders. They become attracted towards companies that pose reasonable and prompt loan servicing.
Here is how to make a smart selection for the right LOS for your business:
1. Streamlined Customer Onboarding –
We are living in mobile-era. A desirable loan origination system is the one that redesigns the customer journey and removes unnecessary break-points for customers with streamlined initiatives like OTP based E-KYC, E-signature, E-mandates, as well as E-stamping. Such a system would improve the overall customer experience for the lender and lower the workload off the staff.
2. Smooth Automation –
A loan origination system is integrated with Banking App Development to ease the whole process with automation capabilities. Automation help lenders manage complete process in a fast and quick manner while lowering the overall cost for operation. Systematic automation allows LOS to execute multiple high-volume, repetitive tasks without any manual intervention.
Loan providing businesses can scale smoothly with seamless automation. They eliminate the necessity to spend a lot of time managing routine paperwork, manual evaluation, and verification work, thus leaving loan officers to engage customers.
3. Compliance to Government Standards –
Lending process comes with different standards, necessitating the need for a quality check. A loan origination system offering quality control for auditing purposes and syncs with guidelines issued by the government provides a beneficial solution. Thus lending organization must select a loan origination system offering support for regulatory compliance. It is because this compliance testing is of huge importance to the lending process. An easy to configure Loan Origination Software is the one that can be smoothly embed into the lender’s workflow.
4. Engaging Functionalities –
A pixel-perfect loan origination software supports different important steps in the loan providing process. A perfect platform address all phases of loan origination straight from the point of sale, comprising post-closing to reduce the burden off a lending officer’s shoulders. A loan origination software can also make the operation error-free.
Apart from selecting the right LOS for your business, you can build your customized LOS. But many challenges are experienced during the development phase which are discussed below.
1. Knowing Business Goals –
Building an idea as per the requirements is always a challenge. LOS is part of the Fintech which is a diverse domain, having different sectors, as per feasibility and scope of innovation. Create a list of questions that are need to ask at this phase.
Questions to Ask
- What is the scope of LOS?
- Is the idea feasible?
- What core advantages will the users obtain from the automated software?
- What are the possible alternatives to the solution and what are their features?
- Identifying Tech Stack
The tech stack is all related to the architecture on which the LOS is built. This includes the database, front-end, server, as well as Operating System. The best technology stack is the one offering different set of advantages for implementing the solution and comprises minimum amount of effort, to develop the mobile app.
Questions to Ask
- Are other LOS using this tech stack?
- How much time and costs will be invested in?
- Are Software Developers for the tech stack easily available?
- How long before the tech stack goes out of scope?
- Identify Software Development Complexities –
A software application can be designed to manage 100 problems with minimum impact. Addressing all problems you wish to resolve will identify how complex the app will become. Again, the complexities of the app must be balanced with resources to build the software.
Questions to Ask
- What are the possible problems that the LOS is addressing?
- How many features will the end-user get in the first release?
- Are the required features different from desired features?
- Is cost of the project change with the surge in features?
- Defining Right UX –
User Experience (UX) is all about the ease-of-use, and interface design. It’s about how the look and feel of the software application. UX can be designed in thousand ways, and selecting the most suitable one is a big challenge. Generally, it grows over time, but the standard and framework have to be laid initially.
Questions to Ask
- What platforms will LOS integrate?
- What level of UX refinement is applied?
- What are the key features of LOS?
- What front-end technologies will be used for it?
- Data Privacy and Security –
Loan Origination Software needs extra caution with strict security standards because the data is very crucial. The system that will handle the data need to be robust to keep the user data secure, and usable. Furthermore, it should meet the privacy guidelines mentioned by the specific government organization.
Questions to Ask
- Is the software secure to process financial data?
- Does it meet the security standards?
- Are the security protocols taken while building the LOS?
- What all things must be kept in mind while implementing security?
So, these are the most important and key challenges faced by the LOS development company.
We hope that this guide could give you insights on how should you go about adopting a reliable loan origination software. The benefits of LOS are incredible and investing in it needs proper expertise. We would appreciate if you implement the above guidelines or customize the existing LOS to suit your business needs exclusively.
Author Bio –
Shweta Pathak is working with a top-rated Loan Processing Software Development Company, OrangeMantra as a senior research analyst. Having years of experience and expertise in software development industry, you can avail latest information on latest technologies. Share your comments and feedback to improve our blog.