The Best Auto Loan Origination Software

auto loan origination

How do you select the best auto loan origination software (LOS)? The best auto LOS systems do more than help you hit your current business goals. They help you adapt to market changes and realize your long-term strategies. In our decades of collective lending business experience, we’ve seen, used, and even developed parts of all the best LOS. Having looked under the hood of all the major systems, here are our must-haves:

Auto Loan Origination Solutions Should Have These Capabilities

  • Cloud-based for rapid implementation, frequent updates, and lower CapEx and OpEx costs
  • Configurable so that you don’t spend time and money on customization
  • Mobile support to extend your services to new customers everywhere
  • Data sources and services that improve decision quality and reduce risk
  • Analytics for insight into applications and lending process efficiency

Cloud-Based Software Is Critically Important—and Cost-Effective

The advantages of the cloud are indisputable. In the years that cloud platforms have been available, more and more enterprises have started using them. Capgemini’s World Fintech Report 2018 acknowledges the cloud’s benefits, stating: “It has proven to be one of the most significant enablers for FinTechs as it offers flexibility in pricing models, agility, scalability, and rapid provisioning…”

A cloud strategy is beneficial to software developers and their customers. The cloud makes it easy to distribute the latest software releases and updates. Customers benefit by getting the latest features and functions right away.

Cloud service providers invest heavily in processing, storage, and communications infrastructure to provide superior performance, high availability (by using redundant hardware with failover capability), and scalability to match the pace of auto lending cycles as they rev and brake. Cloud service providers offer this infrastructure and quality of service more cost-effectively than buying, maintaining, and operating your own on-premises infrastructure. With cloud you no longer have to purchase, provision, and manage computing infrastructure. Your capital expenditures and operational expenditures are reduced.  

Cloud is critical, and we invite you to explore the reasons in much greater detail in our blog Your Loan Management Software Should Be Cloud-based. Here’s Why.

Configurable to Meet Your Loan Origination Needs

Configuration alone may be the most important capability in an auto LOS. It lets each lender modify the system for their unique business focus and lending processes. The best auto LOS is easily configured by business users. There’s no need for time-consuming and costly programming to make modifications. A small sample of the tweaks you can make via configuration include:

  • Design the page layout of the user interface by selecting the data you want to display, labeling them, determining locations on the page, and customizing scorecards for various loan types;
  • Develop formulas to calculate anything from simple math to complex evaluations;
  • Create custom dropdowns mappable to custom fields used throughout the loan origination process;
  • Develop decision rules to automate and consistently execute critical keys steps in the origination process, including pre-bureau, credit bureau waterfall, post-bureau, auto decline, existing customer, conditional approvals, auto structure, and funding; and
  • Integrate external data sources and services to enhance decision quality and process efficiency.

Configuration has immediate and long-term benefits. The immediate benefits include quicker implementation. Once the LOS is provisioned in the cloud, authorized business users can begin configuring the system for their specific roles, functions, and processes. Long-term benefits accrue as you react to changing market dynamics and government regulations, making course corrections as needed along the way.


Read more: What Loan Management System Configuration Does For You

Mobile Support Opens Up New Lending Opportunities

Smartphones, tablets, and other mobile devices account for an ever-greater amount of commerce. Millennials live mobily. You don’t need a desk to conduct business. To compete in the current market, lenders need to offer their services via mobile devices. In support of mobile capabilities, your LOS should:  

  • Allow WYSIWYG design of forms and fields and branding to provide a simple, intuitive applications process;
  • Be mobile responsive so you look good on any device and allow loan applications from anywhere;
  • Permit quick acceptance of terms and conditions; and
  • Allow document capture and uploads: driver’s license, pay stubs, or other documents to verify identity and creditworthiness.

Without mobile capabilities, you’re missing the chance to lend to thousands of potential customers, who expect to be able to conduct business anytime anywhere using devices that are always with them.

Data Sources and Services for Better Lending Decisions

Quality lending decisions are based on data that paint a clear and detailed picture of applicant creditworthiness. Credit bureau scores make it easy to quickly approve exceptional and very good scores and immediately decline the very poor scores. Those with fair and good scores take a bit more scrutiny and processing time. For those ranges, credit bureau scores alone do not support confident decisions.

However, the wealth of consumer data now available as a result the proliferation of digital transactions lets lenders make better quality lending decisions. Consumer data is securely captured, aggregated, and provided as alternative credit data. It can include payment records for water, gas, electric and phone service; income statements, employment records, and rental records – including location, length of lease, payment history, and other records that provide evidence of an applicant’s financial ability.

The best LOS use alternative credit data. This data gives lenders greater confidence in their decisions, and can potentially expand lending opportunities. When alternative credit data is combined with traditional credit bureau data, lenders can:

  • Offer interest rates and terms that more closely match the creditworthiness of applicants, thereby reducing credit risk;
  • Qualify applicants who have “thin” credit files but demonstrate solid financial footing via alternative credit data. Without the perspective provided by alternative data, these would be overlooked lending opportunities; and  
  • Consider applicants with poor credit scores who nonetheless show improved financial strength via alternative data sources.

In addition to alternative credit data, services are available to help lenders identify fraud and ensure that lending practices are conducted in accordance with current regulations. Lenders can minimize the risk of fraud by using services to validate applicant identity. Depending upon your policies, failure to validate can be “hard stop” in the origination process, concluding with an auto-decline response. Alternatively, the service can return contrary data that allows an underwriter to conduct a manual review of applicant information.  

The growing and frequently-changing number of federal and state regulations that govern lending can be difficult to track and implement. Recognizing this challenge, there are now services to help with the compliance and risk aspects of lending. These services ensure calculations such as installments, interest, single and irregular payments, and principal reductions are done according to state and federal regulations that govern the loan. These services are easily integrated into your LOS, thanks to the cloud. Any changes to state and federal regulations are automatically incorporated into the service.

Read more: Acing Regulatory Compliance With Automated Loan Decisioning

Analytics for Continuous Process Improvement

To truly be competitive in the auto lending market you’ll need analytics. Analytics applied to the volumes of data generated by your LOS provides invaluable insight regarding the applicants and process efficiency. Analytics lets you answer these, and nearly any other question you might ask about loan origination:

  • Which dealers are applications coming from?
  • What percentage of applications are direct?
  • What states, cities, zip codes provide the greatest number of applications?
  • How many applications were auto-declined last quarter?
  • Which underwriter had the greatest number of overrides last month?
  • Who are the least efficient underwriters?
  • What is the trend in the look-to-book ratio for the last 6 months?

Analytics should be fully-integrated with the auto LOS. It should be easy to run the analytics. Business users should be able to configure the reports, filter the data, and visualize the results. Avoid analytics that requires users to have SQL skills.

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

Read more: Why Auto Loan Portfolio Analytics Are So Valuable

Auto Loan Origination Software: How To Compete

We’re confident these capabilities—cloud, configuration, mobile, integrated data sources and services, and analytics—will help you implement an auto LOS to best meet your specific lending needs. In the always highly-competitive lending industry, the functionality and benefits of a modern auto LOS are the keys to staying in the race.

At defi SOLUTIONS we focus exclusively on the lending industry. We welcome the opportunity to discuss your auto loan origination needs. We’ll show how the functionality and capabilities of defi LOS and defi Analytics can help create the auto loan origination solution that is best for you. Contact our team today or register for a demo.

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