Selecting the Best Auto Loan Origination Software

auto loan origination

How do you select the best auto loan origination software (LOS) for your institution? The best systems do more than help you address current business goals; they help you adapt to market dynamics and quickly implement the needed policy and procedural changes.

In our years of experience focused on lending, we’ve worked with banks, credit unions, and fincos to develop and support solutions for a broad spectrum of lending requirements. When you’re faced with the challenge of implementing a new auto LOS solution, consider these capabilities that deliver greater efficiency, lower operating costs, and enable you to quickly adapt to changing market conditions.

When it comes to modern auto loan origination solutions, these are the essential capabilities to look out for: 

Capabilities to Look For in Selecting the Best Auto Loan Origination Software  

Cloud-based Platform Provides scalability, rapid implementation, frequent software updates, and lower CapEx and OpEx costs.
No-Code Configurability Enables configuration of workflows, rules, policies, features, the decision engine, and administration functions without the need for programming expertise.
Integration of Data Sources and Services Supports integration of various data sources and services, such as alternative credit data, trended credit data, and fraud information services. 
Integrated Analytics Integrates analytics with the auto LOS, eliminating the technical problems associated with data querying databases and gaining insight regarding applicants, lending decisions, and process efficiencies.
Mobile Support Supports mobile access for customers to perform a range of loan or lease application services on their mobile devices.
Seamless Integration with Other Software Seamlessly integrates with servicing software and other types of lending software to ensure a smooth transition from origination to servicing and provide relevant information to both borrowers and servicing agents.

Let’s delve deeper into why these key features were singled out and what their impact means to you. 

A Cloud-Based Platform—Vital and Cost-Effective

The advantages of the cloud are indisputable. The growth of cloud solutions across all industries is evidence of its economic and operational value. Cloud service providers invest heavily in processing, storage, and communications infrastructure to provide superior performance, high availability (using redundant hardware with failover capability), and scalability that can easily match the pace of auto lending cycles. Cloud service providers offer this infrastructure and quality of service more cost-effectively than buying, maintaining, and operating your own on-premises infrastructure. With the cloud, you no longer have to purchase, provision, and manage computing infrastructure. This leads to reduced CapEx and OpEx costs for lenders. 

A cloud-based lease or loan origination solution makes it easier for lenders to use the latest software improvements. Updates, patches, and new releases are automated, allowing employees to immediately take advantage of the improved features and functions without making demands on a lender’s IT organization. 

Whether you’re a bank, credit union, or finco, a cloud-based lease or loan origination platform is quickly becoming a requirement for efficient loan and lease origination. 

Learn More: Your Loan Management Software Should Be Cloud-Based. Here’s Why.

No-Code Configurability to Customize Your Auto Loan Origination Software

No-code configuration is an equally important capability in an auto LOS. Legacy lease or loan origination software typically requires extensive and expensive programming to transform standard software to meet the specific needs of a lender. In contrast, configuration allows lending professionals to easily customize nearly every aspect of the lease or loan origination software.   

A few examples of the modifications that are easily made by lending professionals include:

  • Customizing the user interface by selecting the data to display, labeling them, and determining locations on the page.
  • Customizing scorecards for various loan types. 
  • Creating custom fields used throughout the lease or loan origination process. 
  • Developing formulas to calculate anything from simple math to debt/income calculations and complex credit evaluations. 
  • Formulating decision rules to automate and consistently execute critical workflow steps, including pre-bureau, credit bureau waterfall, post-bureau, auto decline, existing customer, conditional approvals, auto structure, and funding. 
  • Integrating a wide range of cloud-based information sources to enhance process efficiencies and reduce lending risk.

Customization via configuration facilitates faster implementation by enabling lending professionals knowledgeable about specific aspects of the loan and lease origination process to easily modify the solution to meet those needs. And as market conditions change, modifications to meet those changes can just as easily be made. 

Learn More: How to Improve Your Loan Portfolio: 10 Strategies for Lenders

Integration of Data Sources and Services for Better Decisions

Lending risk is reduced when decisions are based on data that paints a clear, detailed picture of applicant creditworthiness. Credit bureau scores make it easy to quickly approve “exceptional” and “very good” scores and immediately decline “very poor” scores. Applicants with “fair” or “good” scores take more scrutiny and processing time. Credit bureau scores alone don’t provide the financial details required to confidently make lending decisions for those ranges—alternative credit data sources are needed. 

Offer a Clearer Picture of an Applicant’s Financial Standing

The wealth of consumer data now available due to the proliferation of digital transactions is empowering lenders to make lending decisions more confidently. Consumer data such as utility payments, rental records, employment, and income are alternative credit data sources available to lenders to help provide a clearer picture of an applicant’s financial standing. 

By combining alternative credit data with traditional credit bureau scores, lenders are better prepared to:

  • Offer interest rates and terms that more closely match the creditworthiness of applicants, thereby reducing credit risk. 
  • Qualify applicants with “thin” credit files but demonstrate solid financial footing via alternative credit data. These applicants would likely be overlooked without the perspective provided by alternative data. 
  • Consider applicants with poor credit scores who show improved financial strength via alternative data sources.
Learn More: Which Alternative Credit Score Companies Are Best?

Reveal Changing Financial Situations

Trended credit data provide up to 30 months of detailed credit payment history, including card balances, minimum payments due, actual payments, and any amounts past due. Trended credit data provide an additional means of increasing lending opportunities while reducing risks. Below are two examples of how trended credit data helped lenders make more grounded decisions:  

  • Trended credit data revealed that an applicant with a subprime score paid off an $8,500 balance during the past two years, with each monthly payment larger than the previous payment. This trend shows improving financial strength, allowing a lender to offer better terms than a credit score alone would indicate.
  • An applicant with a credit score of 740 represents a low risk. However, upon further analysis using trended credit data, it was revealed that they consistently make the full monthly payment and that their balances increased by an average of $750 each month in the past 18 months. These additional insights allow a lender to offer more competitive terms and boost the chances of gaining a reliable borrower.
Learn More: Which Alternative Credit Score Companies Are Best?

Reveal Changing Financial Situations

Trended credit data provide up to 30 months of detailed credit payment history, including card balances, minimum payments due, actual payments, and any amounts past due. Trended credit data provide an additional means of increasing lending opportunities while reducing risks. Below are two examples of how trended credit data helped lenders make more grounded decisions:  

  • Trended credit data revealed that an applicant with a subprime score paid off an $8,500 balance during the past two years with each monthly payment larger than the previous payment. This trend shows improving financial strength, allowing a lender to offer better terms than a credit score alone would indicate.
  • An applicant with a credit score of 740 represents a low risk. However, upon further analysis using trended credit data, it was revealed that they consistently make the full monthly payment and that their balances increased by an average of $750 each month in the past 18 months. These additional insights allow a lender to offer more competitive terms and boost the chances of gaining a reliable borrower.
Learn More: Using Trended Credit Data for Better Lending Decisions 

Identify Potential Fraud Proactively

Consumer information acquired by nefarious individuals or organizations is being used to defraud lenders of millions of dollars annually. To combat this growing problem, lease or loan origination software must incorporate fraud detection capabilities that help automate the application evaluation process and identify potential fraud associated with stolen identities, false income statements, misrepresented employment, or inflated vehicle values. 

A range of cloud-based information services allow lenders to validate applicant data automatically, flag applications where fraud is suspected, and enable experienced underwriters to review questionable applications to determine the appropriate next steps. 

The best auto loan and lease origination software solutions provide pre-integrated information services, allowing you to select the specific services you need and immediately incorporate them into the loan or lease origination process.

Learn More:  How to Detect Banking Fraud

Analytics for Continuous Process Improvement

You’ll need integrated analytic capabilities to be competitive in the auto lending market. Analytics applied to the volumes of data your LOS generates can provide invaluable insight regarding applicants, lending decisions, and process efficiencies. Analytics lets you answer the following (and nearly any other) questions you might ask regarding lease or loan origination:

  • Which dealers are the majority of applications coming from?
  • What percentage of applications are direct?
  • Which states, cities, and zip codes provide the greatest number of applications?
  • How many applications were auto-declined last quarter?
  • What were the primary reasons for the declines?
  • Which underwriter had the greatest number of overrides last month?
  • What is the average response time to applications submitted via mobile devices?
  • What is the trend in the look-to-book ratio for the last six months?

Analytics fully integrated with the auto LOS eliminates the technical problems associated with data querying databases. There’s no need for SQL skills—configurable dashboards allow lending professionals to conduct the analysis easily and create reports tailored to their specific loan and lease origination responsibilities. 

Lenders who regularly use analytics to evaluate loan and lease origination processes can apply that insight to fine-tune credit policies in response to market changes. Analytics also help identify and mitigate bottlenecks in loan and lease origination processes and anticipate future trends based on analysis of historical data.

Learn More: How Integrated Analytics Improves Auto Los Efficiency

Mobile Support to Meet Consumer Expectations

Today’s consumers have become accustomed to any time, anywhere transactions via mobile devices. Submitting a loan or lease application and tracking its progress should be as easy as ordering from a retailer and knowing when the package will be delivered. To successfully compete in the current market and capture a greater number of lending opportunities, banks, credit unions, and fincos should support mobile loan and lease submissions. To best address consumer expectations, the lease or loan origination software should:  

  • Support WYSIWYG design of forms and fields to provide a loan or lease submission experience that reflects your unique lending practices and brand. 
  • Employ mobile-responsive technology to preserve the user experience on leading mobile devices, allowing applications to be accessed and submitted any time, anywhere. 
  • Provide a streamlined mobile process using display logic to present information and prompts in an intuitive, easy-to-understand manner. 
  • Allow digital document capture for driver’s licenses, pay stubs, or other documents to accelerate the application and review process. 
  • Allow consumers to stop and resume the online process without the application losing any data.

With mobile capabilities, you significantly expand lending opportunities to thousands of potential customers who expect to conduct business via mobile devices.

Learn More: Mobile Auto Financing Software: Benefits for Consumers and Lenders

Seamless Integration With Servicing Software 

The best loan and lease origination software solutions are tightly integrated with servicing software and other types of lending software. This ensures a smooth transition from origination to servicing, providing all the relevant information to borrowers and servicing agents. And just as mobile opens new lending opportunities, mobile can also enhance servicing by enabling a borrower to access relevant account information securely, set up automated payments, determine current pay-off amounts, and better manage the loan or lease. Mobile servicing also reduces call center volumes, allowing servicing agents to focus their time and expertise on customers who genuinely need assistance.

Learn More: Digital Lending Experience Improvement Ideas

Getting Started

defi SOLUTIONS is redefining loan origination with software solutions and services that enable lenders to automate, streamline, and deliver on their complete end-to-end lending lifecycle. Borrowers want a quick turnaround on their loan applications, and lenders want quick decisions that satisfy borrowers and hold up under scrutiny. With defi ORIGINATIONS, lenders can increase revenue and productivity through automation, configuration, and integrations and incorporate data and services that meet unique needs. For more information on automated underwriting system benefits, contact our team today and learn how our cloud-based loan origination products can transform your business.

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