The best LOS systems calculate alternative credit scores for each loan type offered. To start collecting alternative credit data on your own applicants, you’ll need to work with an LOS vendor that understands the importance of alternative credit data and has experience building reliable scoring systems.
According to the American Bankers Association, only half of large banks and 38% of small banks currently use an online or digital loan origination channel. Commercial lending software makes it easy to quickly calculate loan periods, track collateral, and estimate cash flow.
Big data has transformed businesses in every industry. Banks now use data acquired from nearly every step of the loan origination process. The reward: Detailed insight that can be applied to continuously improve lending efficiency and profitability.
It’s an exciting time to be in the lending industry. Major technological advances in loan origination system software have made it easier than ever to process loan applications and automate decisioning. Computers are now doing most of the tedious work, saving organizations hours of potentially wasted time and countless resources.
Lenders looking for an LOS often start by checking loan origination system market share. That can reveal industry leaders and niche players. You’ll get a high-level overview of software functionality and capabilities, and you might get some insight into each vendor’s market strategy and focus. It’s not a bad approach, but it does have some pros and cons.
The lending industry is evolving. Quickly.
Innovative new loan origination system (LOS) features are helping lenders stay ahead, even in competitive industries like auto and real estate lending. Sophisticated technology takes the guesswork out of the loan structuring process, so lenders can make better decisions and assess risk accurately.
It’s impossible to tell precisely how much a used vehicle is worth without detailed historical data. You can kick the tires or take a peek under the hood, but this only gives you a small fraction of the information you need. For instance, it doesn’t tell you how many people have owned the vehicle or whether the airbags have ever been deployed. These factors can significantly impact a used vehicle valuation.
Salesforce has developed a lending solution built on its CRM platform. Financial services providers that have invested in Salesforce and want to start or improve lending will probably kick the tires on it. Let’s look at its pros and cons.
As of this writing, there’s no pending recession, though there’s frequent speculation of a downturn, perhaps in 2020. When that downturn eventually arrives, competition for lending will be intense. Lenders will have to employ every method to minimize lending risk and operational costs. Regardless of the type of your business—bank, credit union, or finco, the biggest factor in maintaining profitability during a recession is likely to be your lending software.
For many lenders, credit risk management depends on years of experience. Their credit risk expertise is a mix of shrewd loan portfolio analysis and an innate intuition about borrower risk. While that may have worked in the past, credit risk management is shifting from human judgment to automated, data-driven lending decisions that assess credit risk far more accurately.