5 Ways Lenders Can Save Time Making Loan Decisions
September 10, 2020 | Merchants | Guest Post
By Sean Albert, SVP & CMO, MicroBilt –
A day in the life of a lender isn’t always easy. Their initial job is to present loan options to borrowers and advise them of the best loans available for their purposes. Once the borrower decides to apply for a loan, the lender must gather information, collect documentation, and take care of numerous other fine details before the application can even be sent for processing and approval. After the initial application packet has been completed, it can then be forwarded on for consideration and tendering a decision.
As a result, many lenders look for a way to save time with the meticulous steps associated with collecting applications and approving loans. Essentially, technology is the name of the game. Integrating tech can significantly make the application and approval process move much more swiftly.
1. Replace Paper with Digital Documents
Strategically utilizing technology almost always equates to a faster process. For example, most payments for e-commerce companies are made online either with credit cards or echecks. Yet, many lending agencies still heavily rely on paper. Many consumers understandably want quick decisions when it comes to getting approved or denied for credit. They also want transparency, meaning they want to know what the process entails. Using electronic documents can effectively address both of these consumer pain points. Digital processing is swift and there is a digital footprint left behind every step of the way, covering both bases. Digital documents add other tangible benefits as well, including:
- Discontinuing the use of unnecessary paper which saves on the cost of copying applications.
- Electronic documents eliminate the delays associated with sending and delivery.
- The ability to give consumers a swift answer regarding the credit decision for their applications.
- Reducing the chance of individual pieces of paperwork being overlooked or not sent.
- Electronic formats are programmed to conform to compliance regulations when it comes to transactional and storage of data.
- Digital documents are highly secure which addresses any potential fraud issues.
- Ensures compliance with industry and government-imposed regulations.
Automation also significantly simplifies and shortens the application package’s time in being shared with all relevant parties involved in the loan decision process. Digital documents reduce the receipt from days to minutes and hours which means a higher number of applications can be processed. This stems from better productivity, and ultimately, higher revenues for the lending institution.
2. Write a Strong Credit Memo
Being the credit memo is such an integral part of the lending process, it’s important to get the structure right. Writing a smarter memo not only helps the applicant have a better loan experience; it helps mitigate risk management for the lending agency as well. Consider all the pertinent details that must go into a credit memo.
- Applicant information
- Financial ratios
- Cash flow analysis
- Proposed loan pricing
- Terms of a proposed loan
- Assigned risk rating
This is a lot of information to present and it takes time to compile. While there is no one-size-fits-all memo since loan applications will contain different information, a general template can be utilized to help save time. Whatever memo format is chosen, it should be clear, concise, organized, and relevant. Eliminate extra verbiage, avoid industry jargon, and stick to facts.
Take it a step further and use credit analysis software that has an option to create customized credit memos to help expedite this process.
3. Use Instant Bank Verification
Determining a borrower’s ability to pay back a loan is critical. Lenders don’t want to approve loans for people who are likely to be delinquent. Banks look at delinquency rates to get a better understanding of the risk profile associated with a potential loan. With the current COVID-19 pandemic still ongoing, it may become harder to assess a borrower’s ability to repay their loans.
The economy’s future is still very much in flux while the global pandemic continues. Although, early signs show most types of loans remain stable according to the Federal Reserve Bank of Minneapolis. Gathering as much information as possible can help alleviate risk when making approval decisions.
Digital tools can significantly reduce the time spent gathering and compiling the necessary pertinent information. Instant Bank Verification is one such tool. With this type of technology capacity, lenders can speed up the steps involved in loan processing to get to the heart of the decision-making process.
- Obtain real-time transactional data.
- Access bank account data using financial REST APIs from over 15,000 global financial institutions.
- Receive a comprehensive picture of an applicant’s credit history, including an alternative credit check, which gives lenders a more robust idea of a borrower’s habits when it comes to paying financial obligations.
- View income and available bank balances.
- Access a list of an applicant’s total financial obligations and loans.
- Help ensure applications are approved in a faster-than-average fashion.
Essentially, any technology that can aid in application and identity verification helps to significantly accelerate the decision process. This helps lenders avoid losing customers who might move on to a competitor with a faster ability to make a loan. The customer may be looking for a quick loan, and a rapid process is key.
In turn, verification technology helps lenders because they are able to receive corroboration of the information they need and use it to get a stronger feel of any potential risks. They can also identify borrowers who are more likely not to default. Thus, better – and faster – lending decisions can be made.
4. Integrate Data Wherever Possible
Again, technology is the name of the game because it makes integrating data so easy. Legacy lending systems have severe technical limitations and the individual pieces needed to complete loan-related tasks are often decentralized. However, modern software and cloud-based applications enable lenders to better integrate data. This enhanced ability:
- Boosts productivity as the processing capacity is able to be increased.
- Increases the accuracy of the information contained in loan application packets.
- Gives the ability to make better quality decisions when it comes to approvals and denials.
- Heightens efficiency of the overall lending process.
- Automation replaces repetitive tasks which allows you to allocated human resources to tasks that need a personal touch.
Essentially, technology in the lending industry isn’t just a novelty tool, when leveraged effectively and strategically, it can be a true game-changer. Anywhere you can reduce, or even eliminate, manual processes can make a significant difference, and integrating data goes a long way towards speeding up the ability to make good loan decisions.
5. Integrate Mobile Capabilities
Not all consumers have access to a personal computer; many rely on their smartphones or tablets to do their banking. Portable banking increases the convenience factor for both the consumer and the lender.
According to a Deloitte study, lenders using mobile can increase the communication factor and deliver faster decisions, increasing both customer satisfaction and loyalty (even if the loan application has been denied – most people appreciate a fast answer).
As you know, the lending process, from beginning to end, is a complex one. However, finding ways to integrate technology, along with some other key time-saving tips, can expedite the process. In the long run, this is a win-win for both the borrower and the lending agency.
September 10, 2020 | Merchants | Guest Post