Choosing the Best Auto Loan Origination Software

In the past three years, over 80 percent of new cars were financed, according to Statista. Is your loan origination software (LOS) able to keep up with this demand? If not, it may be time to choose a new loan platform.

The best auto loan origination software for lenders should do more than just support current business goals. It should also allow you to quickly adapt policies and procedures to rapidly changing market conditions. And for borrowers, the best auto loan origination software should deliver a speedy and seamless customer experience.

Lending solutions must support a broad spectrum of lending requirements, whether for banks, captive lenders, credit unions, or other auto loan providers. The capabilities of any new auto lending platform must be carefully considered as well, so that they operate with greater efficiency and reduce operating costs.

The best auto loan origination software offers the following:

The impact of these key features serves both the lender and the borrower.

The Best Auto Loan Origination Software Is Cloud-Based

When it comes to modern business software, cloud-based systems have indisputably proven to be the best. Auto loan origination software in the cloud offers both lenders and borrowers greater flexibility. Cloud-based providers allow auto lenders to:

• Invest in infrastructure that supports superior performance in processing and storing data as well as providing high availability to limit system downtime.
• Scale their operations more readily to match the fluctuations in auto lending cycles.
• Provide access to services more cost-effectively than lenders could with on-premises infrastructure.
• Reduces lenders’ capital costs, while also curbing operational expenses.

As a result, lenders no longer need to purchase, provision, and manage IT infrastructure onsite. It also gives them access to the latest software updates and patches with automated updates. This allows all users to take advantage of the improved features and functions as soon as they become available.

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

No-Code Configurability Options for Greater Flexibility

Coding has become an increasingly unnecessary process for reconfiguring modern software platforms. The best auto loan origination software incorporates no-code configurations, which allows laypeople to customize and configure every aspect of the lease and loan origination process. In contrast, legacy systems require programmers to customize or make changes.

Examples of how these lease and loan platforms can be modified include:

• Adjusting the user interface display according to location and data labeling.

• Creating custom fields for use throughout the lease or loan origination process.

• Customizing credit scorecards for various loan types.

• Developing formulas to conduct calculations to aid credit evaluations.

• Formulating decision rules that enable greater consistency in credit decisions.

• Integrating cloud-based information sources to enhance efficiency and reduce lending risk.

Eliminating the need for coders to configure platforms helps reduce costs and time when a process requires modification. The best auto loan origination software allows lending professionals with minimal computing knowledge to facilitate changes on the platform. This allows lenders to more easily alter the platform to respond to fluctuating market conditions, new regulatory requirements, or other changes.

Learn More: How to Improve Loan Origination Automation in Banking for Auto Lending Processes

Integrating Data Services & Sources for Better Decisions

Lenders reduce risk when they base decisions on data that creates a detailed picture of an applicant’s creditworthiness. With access to credit bureau scores, lenders can quickly approve applicants with “exceptional” and “very good” scores, while instantly declining those with “very poor” scores. This gives human underwriters the time to more closely scrutinize applicants with “fair” or “good” scores, optimizing processing time and enlarging the pool of potential borrowers without increasing risk. However, as credit bureaus don’t paint a complete picture of an applicant’s creditworthiness, lending decisions also need to consider alternative sources of credit data.

Determine Applicant Financial Standing

The number of digital transactions occurring on a daily basis has empowered lenders by giving them access to a wealth of consumer data. This abundance of information helps speed decisions and opens new opportunities, allowing lenders to do what they do best. Auto loan origination software provides access to information on employment, income, rental records, utility payments, and other alternative credit data to provide a clearer understanding of an applicant’s financial health.

Combining credit scores with this alternative credit data allows lenders to:

• Approve applicants with solid finances but with little credit history through analysis of alternative credit data, creating more lending opportunities without raising risk.
• Consider lending to applicants with poor credit scores but with positive financial indicators showing suitable creditworthiness.
• Manage terms and interest rates more closely to better gauge applicant creditworthiness.

Learn More:Which Alternative Credit Score Companies Are Best?

Uncover Changing Financial Situations

To uncover whether an applicant’s financial situation has changed recently, trended credit data can provide a detailed credit payment history for up to 30 months. This includes actual payments, balances, minimum payments, and past due amounts, providing data that can increase lending opportunities while reducing risk. Trended data helps lenders make more sensible decisions.

For example, trended credit data might reveal that over the past two years the applicant paid off an $8,500 balance, making monthly payments that increased from the month before. This indicates an improved financial situation that shows an ability to make ever larger payments. In this case, the lender may offer better terms than the applicant’s credit score on its own would otherwise signify.

Looking at another scenario, a seemingly low risk applicant has a credit score of 740, which would normally mean the potential borrower has a “very good” credit rating. Yet when digging into the trended data, the data shows their credit balances increasing an average of $750 per month over the last 18 months while making only minimum payments. This insight reveals that the applicant is less creditworthy than their credit score would indicate.

Learn More: How Trended Credit Data Reports Improve Loan Origination Decisions

Make Fraud Detection Proactive

Bad actors use nefariously gathered consumer information to defraud U.S. lenders of tens of billions of dollars annually. To combat the problem, lease or loan origination software must detect potential fraud. Inbuilt fraud detection capabilities that automate the applicant evaluation process help identify potential fraud, such as through falsely stating income, inflating vehicle assessments, misrepresenting employment, and using stolen identities.

Various cloud-based services enable lenders to automatically verify applicant data, while flagging suspect applications so that experienced underwriters can review questionable applications. The best auto loan origination software makes it easy to integrate with services that suit the lenders’ processes.

Learn More: How to Detect Fraud in Banking

Improving Processes with Analytics

To remain competitive, lenders need analytics capabilities to screen out mediocre applicants from the best. Auto loan origination software with integrated analytics allows lenders to apply data to glean insights about applicants, improve processes, focus advertising, and otherwise enhance decision-making. Analytics software can reveal information not only about potential borrowers, but about all aspects of the origination process.

Analytics can help lenders answer questions like:

• Which underwriter overrode the most applications last month?
• Which dealers send the lender the most applicants?
• What were the primary reasons for declined applications?
• What proportion of applications are made directly?
• What is the trend in the look-to-book ratio for the last six months?
• What is the average response time to applications submitted via mobile devices?
• How many applications were auto-declined in the last fiscal quarter?
• From which cities, neighborhoods, and zip codes do the greatest number of applications come?

Fully integrated analytics within a platform works best. Auto loan origination software that can read databases eliminates technical difficulties that often occur. Plus there’s no need for lending professionals to understand specialized programming languages like SQL (Structured Query Language) when accessing data. Instead, configurable dashboards enable underwriters to conduct analyses and create reports with ease.

With analytics, lenders can use the insights these programs provide to fine-tune their credit policies in response to market changes. It also helps reveal and resolve bottlenecks throughout the lease and loan origination process, while also using historical data to anticipate future trends.

Learn More: Why Loan Portfolio Analytics Are So Valuable

Supporting Customer Experience via Mobile Devices

With the proliferation of mobile devices and widespread availability of Internet connectivity, consumers today have become accustomed to making financial transactions from anywhere and at any time. To successfully compete in the industry, lenders must ensure their customers can submit loan or lease applications and track progress easily via these mobile devices.

The best auto loan origination software should:

• Employ mobile-responsive technology that provides the best user experience for all mobile devices, allowing applications to be accessed from anywhere and at any time.
• Enable bank statements, driver’s licenses, proof of insurance, and other documentation to be captured digitally to accelerate the application and review process.
• Permit consumers to save and resume their online application without losing data.
• Provide an intuitive user experience that allows applicants to interact with the platform easily on mobile devices.
• Support forms and fields on applications that clearly reflect the lender’s brand and protocols.
• Providing mobile capabilities expands lending opportunities while supporting a better customer experience.

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

Seamless Integration with Servicing & Other Software

Integration with loan servicing and other lending software ensures a smooth transition from origination to servicing. Ensuring that relevant information passes to both borrowers and servicing agents helps streamline servicing processes. Further, it allows borrowers to securely do things like set up automated payments and determine amounts for discharge payoffs, while helping lenders manage the end-to-end loan or lease process. Enabling borrowers to make minor changes reduces call center volumes, while allowing customer service agents to focus on more essential issues.

Learn More: Banking Technology Trends: What To Expect in 2025

Selecting the Best Auto Loan Origination Software 

Auto lenders across the board benefit from adopting a comprehensive auto loan origination software to their tech stack, seeing an average 70% reduction in processing times and ~40% decrease in operating costs. Still, it can be difficult to determine which of these options is the best for your business. The teams at defi SOLUTIONS have been helping auto lenders optimize their operations for over 30 years and we would love to help you on your journey. Reach out to us at the links below to learn more.