Anyone who orders from Amazon regularly understands the advantages of a completely digital process. Order in seconds. Delivery in 2 days or less. Similar improvements are being made in lending. Easy application process. Rapid decisioning. Increased capture rates. Lenders who adopt the latest innovative digital lending technology are realizing:
- Quantifiable improvements in loan origination speed;
- Greater consistency in lending decisions;
- Better ability to meet compliance requirements; and
- Continual improvement in lending efficiency and portfolio performance through the use of analytics.
#1 Improved Loan Origination Speed
The biggest advantage of digital lending technology is process speed. A loan application submitted digitally, including any supporting documentation, creates the foundation for an entirely digital process. Workflows direct the underwriting process. Decision rules evaluate applicant attributes in seconds.
Automated calls to cloud-based services access alternative credit data sources to provide a clearer picture of application financial strength, verify employment, and obtain accurate vehicle valuations without the need for underwriter intervention.
Machine learning calculates optimum loan terms based on relevant application attributes and risk factors. Fraud analytics identify applications containing misinformation that strongly correlates with loan delinquencies and defaults. Within seconds of loan approval, lenders send offers via E-contracts in email. E-signatures allow borrowers to immediately sign and return the offer.
Digital lending technologies accelerate the entire process, and frequently allow lenders to respond to applications within seconds of receiving an application. In a highly-competitive lending market, digital lending technologies deliver the experience expected.
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#2 Greater Consistency in Lending Decisions
Digital lending technologies can eliminate variability in underwriting decisions. Credit policies translated into rules guarantee consistency in lending decisions. There are many situations where underwriter experience can’t be replaced by digital lending technology. However, underwriters vary in experience and skill in evaluating applicant attributes and structuring deals. Using a system of workflows and decision rules can ensure that your organization executes and applies loan origination processes and credit policies consistently.
#3 Comply With Federal, State, and Local Regulations.
Decision rules also provide evidence that a lender complies with relevant federal, state, and local lending regulations. Designated roles and responsibilities determine which qualified lending professionals can configure decision rules and determine where in the process the rules are applied. Decision rules provide a record of who, when, and where decision rules were used and which rules were in effect at the time. For underwriters and servicing agents, particularly those new on the job, decision rules eliminate risks associated with having to remember when and where to apply the regulations.
#4 Analytics for Process Improvement and Portfolio Profitability
Analytics help lenders get the most from their digital lending process. Modern loan origination solutions generate volumes of borrower and operational data that can be analyzed to provide detailed lending process insight.
Monitoring loan applications over the course of a week, month, quarter, and year helps lenders anticipate and allocate appropriate underwriting resources to accommodate seasonal demands. Borrower attribute analysis provides insight into loan sources, demographics, credit tiers, and many other characteristics to help drive marketing strategy. Analysis of loan origination processes identifies decisioning bottlenecks and areas where workflows and decision rules can replace manual tasks.
Analytics can enhance portfolio profitability by determining how borrower characteristics and credit policies impact loan performance.
- Which characteristics correlate with the likelihood of defaults?
- Should credit policies be eased to capture more loans or tightened to reduce risk?
Careful and continuous portfolio analysis gives lenders the ability to fine-tune credit policies to increase capture ratios, reduce risk, and improve overall portfolio profitability.
Today’s Market Demands Digital Lending Technology
With the latest innovations offered by digital lending technology, lenders can implement an fully-digital loan origination process. Easy application submission, rapid decisioning, compliant lending processes, and the ability to continually improve process efficiency and portfolio performance are must-haves for lending success.
defi SOLUTIONS’ lending technology and analytics experts welcome the opportunity to discuss how to improve process efficiency and portfolio performance. Take the first step to completely digital loan origination by contacting our team today or registering for a demo of defi LOS.
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