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AUTO LOAN ORIGINATION BEST PRACTICES FOR CREDIT UNIONS AND BANKS

The defi Team auto loan origination software, Automation, Community Banking, Credit Unions, defi ANALYTICS, defi CONNECT, defi INSIGHT, defi LOS, defi Partners, Digital Loan Documents, Digitalization, Fraud, Loan Origination Software, Reporting & Analytics, Simplifying Processes, Technology

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Loan origination best practices benefit both consumers and lenders. After years of developing, delivering, and supporting lending systems, we at defi SOLUTIONS are convinced that in order to implement loan origination best practices, you need to ensure your lending software is the most up-to-date. Technology improvements facilitate better processes and lending decisions. Today, modern cloud-based lending platforms are helping credit unions and banks implement best practices more easily than ever before. 

Modern lending platforms support the entire lending cycle—from loan origination to final payment—to provide continuity of information and processes. For credit unions and banks struggling with poorly-integrated or aging software, here are key ways that a modern lending system facilitates loan origination best practices. 

Convenience Is Prioritized for All Involved Parties

Today’s consumers have become accustomed to transacting business via mobile devices—loan origination shouldn’t be any different. Loan origination via a mobile device positively impacts both consumers and lenders. Consumers can initiate a loan or lease application anytime, anywhere, and lenders benefit from a completely digital application that accelerates decisioning and reduces operational costs.

Whether they’ve been researching vehicles for months and are now ready to visit the dealer, just found the classic car of their dreams in an advertisement, or are scrambling to get a much-needed second vehicle, a loan can be applied for in minutes. 

Key capabilities that make it convenient for consumers to apply for a loan or lease include:

  • A user-friendly design with a logical presentation of prompts based on loan type and previously-entered information to seamlessly guide the applicant through the process. 
  • Information verification functions and services that minimize incorrect information that could delay application review and approval. 
  • The digital capturing of documents via the device’s camera to eliminate delays associated with paper applications. 

From the perspective of today’s consumers, mobile loan or lease origination is expected, generally preferred, and therefore considered a best practice. Without that capability, lenders are missing countless lending opportunities. 

Mobile Loan Origination Facilitates Underwriting Efficiency

Loan origination via mobile devices delivers all the required information to the lender in a digital format. It allows banks and credit unions to eliminate manual underwriting steps through the utilization of automation capabilities, which enable lenders to quickly respond to loan or lease applications and boost their chances of successfully capturing opportunities.

In a modern lending platform, configuration via a comprehensive set of menus is the best practice for tailoring the software to the specific needs of the lender. With configurable menus, programming skills are not needed to bring a high level of automation to the loan origination process. Lending professionals can easily: 

  • Develop custom dashboards that display relevant loan or lease information based on the underwriting step of line-of-business responsibilities.
  • Create data-driven workflows that support a consistent yet flexible loan origination process that reflects the lender’s unique practices. 
  • Establish auto-structuring rules that automatically and iteratively modify loan terms to create a deal structure that matches credit rules when applicants fail initial credit policies.
  • Integrate innovative lending services that improve process efficiency and reduce lending risk.

Compliance is a continuing concern for any lender. Implementing compliant practices and proving compliance can often be challenging. A modern lending platform that uses configuration to tailor the lending process to the specific needs of the lender solves this problem by automatically maintaining a record of modifications made. This makes it easy to demonstrate which policies and processes were in place and determine when they were changed per new or updated regulations.

Cloud-Based Lending Services Enhance Decision Confidence

Credit unions and banks should take advantage of the ever-increasing number of cloud-based information sources that accelerate loan decisions and reduce risk. These innovative services significantly enhance a lender’s ability to respond to loan requests faster and with greater confidence. The table below highlights some of the more innovative sources that are helping credit unions and banks reach a new level of best practices in loan and lease origination. 

ServiceBest Practice Benefit 
Alternative consumer data sourcesGive lenders a more accurate understanding of an applicant’s financial standing and recent credit trends. Boost loan opportunities for applicants with “thin” credit records. 
Fraud detection and information verificationIdentify applications with a high probability of inaccurate information provided solely to improve the chances of getting approved for a loan. Avoid high-risk applications likely to lead to defaults. 
Machine learning underwriting techniquesCalculate risk-adjusted terms in a matter of seconds. Apply sophisticated algorithms to a wide range of consumer data to increase lending opportunities without increasing risk. 

Modern loan origination platforms make it easy for credit unions and banks to incorporate these and many other cloud-based information sources without the need for time-consuming programming or customization.

Best Practice: Use Analytics to Gain a Better Understanding of Lending Efficiency and Opportunity
Analytics deserves more focus than we can devote here. Analytics plays a key role in helping credit unions and banks improve nearly every aspect of their lending practice. Learn more about the value of analytics in our quick read: 3 Auto Finance Analytics Innovations

Boost Loan Origination Best Practices With a Modern Lending Platform

A modern lending platform supports mobile applications, provides versatile automation capabilities, and offers innovative cloud-based lending services. These capabilities can significantly boost the ability of banks and credit unions to implement loan origination best practices that address the needs of today’s consumers. 

Getting Started

defi SOLUTIONS’ online defi CONNECT product brings borrowers and lenders together. defi CONNECT integrates with defi’s flexible, scalable, end-to-end platform that includes mobile loan and lease originations and servicing systems. If you’re challenged by the limitations of your current lending software, take the first step in realizing the benefits of a modern lending platform. Contact our team today or register for a demo.

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