loan origination business rules


The defi Team Automation, defi INSIGHT

automated loan processing system

You can’t go a day without the benefits of automation. From better-quality automobiles to robotic picking and packing at Amazon warehouses to the automatic espresso machine that gets your day started, automation is everywhere. The auto lending industry is no different. Automation is having a positive impact for lenders and borrowers alike. Indeed, in the current market of declining auto sales and fewer loan opportunities automated loan processing systems are essential for lenders to remain competitive and profitable.  

Automated Loan Processing System

A modern automated loan processing system has distinct advantages over legacy lending systems. Using the latest cloud and web technologies, it is quickly implemented, configurable, provides a superior customer experience, improves decisioning accuracy, and eliminates paper documents. Automated systems accelerate all stages of the loan cycle. In a typical week, you receive hundreds to thousands of applications, yet only a percentage of them are right for your lending strategy. Automated loan processing gives you the ability to quickly evaluate and identify applications that meet your lending criteria, underwrite confidently, notify the borrower, and fund the loan.  

 Replacing manual steps with automated decision rules, transforming paper into digital format, and gathering performance data on all aspects of your lending practice lets you:

  • Provide a better user experience to improve the speed and accuracy of loan applications
  • Process a larger number of loan applications with existing resources
  • Eliminate sources of human error for faster, better-quality evaluation decisions  
  • Establish predictable, repeatable, and auditable processes that support compliance
  • Reduce delays and costs associated with paper processes
  • Analyze process and loan performance with the goal of continually improving efficiency and profitability

To be successful in a very competitive auto lending market, lenders must adopt modern loan processing solutions. The automation technologies and capabilities incorporated in these solutions give lenders big advantages in today’s market.

To be successful in a very competitive auto lending market, lenders must adopt modern loan processing solutions.

Improved Customer Experience

The internet and web have made so many of our daily transactions frictionless. You can purchase just about anything, buy and trade stock, deposit checks, and even adjust your home’s heating and cooling from desktop and mobile devices. As consumers, we have come to expect simplicity in our commerce. However, one area in need of improvement is lending. Today, too many consumers think the process of obtaining an auto loan is complex. In a Federal Reserve 2016 survey, nearly half of all respondents complained of the difficult application process and time to receive a credit decision. An automated lending system can dramatically change this perception by simplifying and accelerating the entire process.

Because the lending process begins via the web, the applicant could be at home, at a dealer, or in any web-accessible location. Automation and configurable menus lead the applicant through the process, prompting for required information and providing guidance when needed to help the applicant enter the correct information. The flexibility and power of decision rules verify that information has been entered correctly.

Paper documents, if required, are digitized and securely sent to the lender to eliminate delays associated with shipping documents to a lender. When automation is applied to the application process, all required information is collected quickly and accurately and transmitted to the lender for a faster decision process. In today’s auto lending market, faster credit decisions are a competitive advantage.

Accurate and Repeatable Decisioning

Automation improves applicant evaluation and loan decisioning. It eliminates repetitive manual steps that are best executed digitally and allows human expertise to be applied where it works best. Examples include:

  • Decision rules evaluate applicant attributes and provide immediate loan approval for well-qualified applicants or declination for applicants who have no credit history, are underage, or over-extended credit.
  • Integration with credit data sources and services such as Digital Matrix Systems lets lenders automatically and quickly verify applicant information.
  • Decision rule flexibility can guide processing for exception applications, performing certain steps of the evaluation process automatically and delegating more complex decisions to experienced underwriters.
  • No lost or misplaced documents. Paper documents converted to digital images are immediately and securely accessible by the underwriter, so they can review applicant materials more quickly.
  • The combination of decision rules and integration with credit data sources and services lets lenders automatically calculate optimum loan structures and terms.
  • Decision rules provide predictable, repeatable processes that remove the variations associated with human decisions and demonstrate compliance with lending regulations.

Multichannel for Digital Notification

Automation decreases the manual work associated with notifications. Every application requires a response, and a digital economy gives lenders great flexibility in how to respond. An automated loan processing system helps lenders create a variety of notification templates that are then populated with applicant and loan-specific information before sending the notification. Multichannel communication gives lenders the ability to send notifications by email, print, and even text messages.

One clear advantage of multichannel communications is the reduction of printing and mailing costs. Even better: Secure, digital retention of notifications as records. Not only is this beneficial in the event of demonstrating regulatory compliance, as in the case of adverse action letters, but it also relieves lenders of the cost and risks in storing paper documents.

Analytics for Continuous Process Improvement

In addition to the advantages mentioned above, automation opens the door to analysis of your lending practices. An automated process creates a wealth of application, underwriting, and funding data. Analytical tools specifically designed for lending allow you to slice and dice this data to determine where improvements can be made to current lending practices. Your analytic results will show you where you are already performing well (no need for improvement) and more importantly identify areas for lending practice improvement. With analytics tools you can:

 Identify the geographies that send you the best loan opportunities and determine how you might replicate this success in other geographies.

  • Determine which borrower factors have the greatest influence on loan performance and use this insight to accept more applicants with these attributes.
  • Discover which loan structures and terms reduce risk default for subprime borrowers.
  • Identify borrower characteristics that lead to unexpected delinquencies and implement more stringent qualification steps to reduce risk.
  • Identify unnecessary, time-consuming manual steps in loan origination that can be improved through the use of decision rules.

Think of analytics as an essential tool, allowing you to gain even greater benefit from an automated loan processing system. Automation improves the efficiency of your lending practice. Analytics monitors your performance and provides insight to continually improve process efficiency. In a competitive lending market, continuous process improvement is essential to sustain profitability.

Success Requires Automation     

Automation has positively impacted our daily lives. It increases productivity, reduces costs, and improves quality and consistency of consumer products and services. It’s safe to say that today few industries can be competitive or profitable without it.

Lending is no different. An automated loan processing system provides a better customer experience by making loan applications simple and quick. Decision rules enable a faster, more accurate underwriting process. Multichannel communications facilitate faster notifications that can be retained as digital records in support of compliance requirements. Analytic tools give you the power to continually improve lending efficiency and loan performance. To effectively compete in today’s auto lending market, lenders need to recognize the advantages of automation and the benefits it provides throughout the lending process.

defi SOLUTIONS provides a flexible, completely configurable loan origination system (LOS) that is quick to implement and provides a reporting and analytics platform (defi ANALYTICS) for actionable insights based on process and loan performance to help lenders compete in today’s market. The defi SOLUTIONS team welcomes the opportunity to discuss your automation needs. Contact our experts online, or schedule a demo to see how we’ve incorporated the latest data integration, decisioning rules, and analytics technologies into our LOS to help you reduce risk and positively impact portfolio performance.

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