Understanding the Loan Origination Business Case for Auto Lenders
Companies that fail to keep their software up to date with current technologies risk losing out on lending opportunities. In the world of auto lending, loan origination is a complex and time-consuming process that requires precision, close attention to detail, and lots of data. There are complex processes involved, each with its own set of requirements and expectations. This is where automation tools come in. They can help lenders automate their loan origination process to make their unique lending operation more efficient, accurate, and secure.
In this loan origination automation business case, we’ll examine why keeping your software up to date with the latest cloud technologies is a great way to improve your business.
A Loan Origination Automation Business Case for Auto Lenders
Modern loan origination technologies are a very important resource for lenders to capture the right loans quicker and more accurately. With how quickly technology moves, having a loan origination system that’s even a few years old and unable to updated is like using a landline instead of the latest smartphone. Modern lending tech can improve every aspect of the loan origination process. Let’s start by taking a closer look at why cloud-based systems are more efficient and scalable.
Auto Structuring for More Lending Opportunities
On Site Legacy vs. Cloud-Based Modern Solutions |
| In the not too distant past, on-site legacy systems were the only option for a company. But now, with cloud-based modern solutions, companies can save time and money by not having to invest in expensive hardware and software.
An on-site legacy solution is software installed on the company’s own servers. It can be accessed from any computer in the office, but it may not allow access from outside of the office. These legacy systems require a lot of maintenance and don’t offer the same depth of features or level of mobile functionality as modern systems. Modern, cloud-based solutions are hosted by a third party and can be accessed from anywhere with an internet connection. Cloud-based solutions are less costly to install and maintain and give lenders the latest advancements in lending capabilities. Modern solutions offer a more user-friendly interface with updated features that outdated legacy systems simply don’t have. Cloud-based solutions are becoming increasingly critical among lenders. They provide a better user experience and are more cost-effective. They also offer a better customer experience because they are accessible from any device. |
Traditional Software Coding Methods VS. Configuration From a Menu |
| When it comes to software coding methods, there are two main approaches. The first one is the traditional method, where the developer codes every single line from scratch. This is understandably a time-consuming process that requires a lot of expertise and experience.
The better alternative is to customize your software using configuration via a configuration menu, which can be done by selecting the options from a list. More modern systems allow a lender’s system admins to set user roles and permissions and determine by role or individual user what fields can be seen or edited. And the most modern systems even allow users to determine how that information appears on their pages. Configuration can happen much faster and easier than coding. It also allows you to choose the features you want for your software without requiring you to do any coding. An authorized lending professional selects pre-written code blocks and drag and drops them to create a loan origination software that fits their unique business needs. |
In-Person, Desktop Applications VS. Mobile App Capabilities |
| Mobile loan applications are becoming more popular as the world becomes more mobile. They are convenient and easy to use, and they can be accessed from anywhere. The use of mobile apps has been on the rise in recent years. A study by Pew Research Center found that about one-third of American adults have used a mobile app to apply for a loan, while only about one-fifth have applied in person at a dealership or banking institution. The main benefit of mobile loan applications is that they can be completed any time, from any location. This means that borrowers will not have to go through the hassle of going into a physical branch to apply for a loan. Utilizing loan origination software with mobile app capabilities saves borrowers time and frustration. Here’s a quick comparison of the two loan application processes: In person loan applications:
Mobile App loan applications:
Mobile loan applications are more convenient for the borrower and the lender. The borrower can apply for a loan anytime, anywhere, and there is no need to go to a physical location or wait in line. The lender can also approve loans faster and with less effort. |
Credit Bureaus VS. Alternative Data |
| Traditional credit bureaus have historically been the most common method for lenders to assess borrowers’ eligibility for a loan. This type of data has always played a major role in determining whether or not someone is eligible.
Alternative credit data is a new way of evaluating the creditworthiness of an individual. It includes information like utility bills, rent payments, and other data points not included in traditional credit bureaus. This type of data can be used to assess the risk of lending to a borrower more deeply. It can also be used to help lenders make decisions about whether or not they should extend credit to someone who may have otherwise been turned down. The main difference between alternative credit data and traditional credit bureaus is that alternative credit data is more comprehensive than conventional methods. Alternative methods also provide a more recent and comprehensive financial overview of borrowers, rather than just their overarching financial history. Whether traditional or alternative, a modern system lets the lender decide which bureau or bureaus and which alternative credit providers fit their needs and make it easy to pull in the right data points at the precise point in their processes they need it. |
Auto structuring is a process that automatically structures loans for borrowers. Auto structuring takes applications that fall just outside of a lender’s criteria and makes minor adjustments in order to come to a deal. It takes the borrower’s information and structures the loan in a way that fits the lender’s criteria. Auto structuring is based on the lender’s rules and policies and brings much needed efficiency and streamlining of once time-consuming and error-prone loan processing. Auto structuring transforms your lending operation and provides accurate underwriting in seconds.
This automation feature dramatically increases your lending opportunities by creating deals that fit your policies for borrowers who would not have qualified otherwise.
Selecting The Best Lease or Loan Origination Platform
The best loan origination platforms allow lenders to create a system with the exact capabilities they need. With modern systems, lenders don’t have to be limited by the platform or have to mold their operations to match the system. As a lender, you understand your unique value in the industry, and you need a platform that will allow you to bring your differentiation to the table.
When you can start with a core system with basic functions and then build with flexible and configurable pieces, you can fully utilize your secret sauce. For example, if you’re a direct lender who decides to transition to indirect lending, or an auto lender transitioning to a power sport lender—you need a platform that will easily allow you to evolve your operations. A platform’s capabilities will dictate how flexible and scalable you are as a lender, and your platform should grow with your business.
Machine Learning for Better Fraud Protection
With the sheer volume of auto loan applications and the high pressure to increase loan captures, it’s increasingly challenging for lenders to detect fraudulent applications. Technology has made it too easy for applicants to misrepresent their income, employment, and identity. But thanks to modern lending technologies, like machine learning, lenders are able to stay ahead of fraudsters.
Machine learning is used to make predictions based on data. It allows lenders to approve more loans by reducing the amount of manual work required by underwriters. This automation feature has also been used in the financial industry for years to detect fraud in lease and loan applications. The algorithms are trained to identify patterns and anomalies in the data which might indicate fraudulent activity. Machine learning algorithms are able to find sophisticated fraud traits that humans simply cannot detect.
A Leading Edge Solution Starts With the Right Provider
This loan origination automation business case examines outlines how configurable cloud technologies are the future of lending software. They provide a way for lenders to keep their software updated with the latest features and advancements. This business case for auto lenders demonstrates that modern loan origination can help your business stay competitive in the fast-paced lending industry. When it comes to crafting a leading-edge solution, you have to partner with the right provider.
Getting Started
defi SOLUTIONS provides a complete end-to-end solution that fits a lender’s lease or loan lifecycle. Flexible, configurable origination, loan management and servicing, analytics and reporting, and a wide range of technology-enabled BPO services. So if you’re struggling with the limitations of your current legacy system, take the first step in realizing the benefits of modern technology. Or, if you have any questions about this loan origination automation business case, contact our team today or register for a demo.
