loan origination business rules


The defi Team Auto Dealers, Automation, defi CONNECT, defi INSIGHT, Digital Loan Documents, Digitalization, Reporting & Analytics, Simplifying Processes, Technology

loan origination business rules

Establishing a mutually beneficial relationship with local auto dealerships can be one of the most effective ways to grow your lending business. You can promote those dealers to your customer base and boost your indirect auto lending opportunities. However, to establish indirect auto lending programs with local dealerships, you’ll need to differentiate your services in a way that truly benefits the dealer.

In a competitive market, the efficiency of your indirect auto lending process is critical to establishing and maintaining relationships. Today, efficiency is primarily a function of the technology you use to manage the indirect auto lending process. We’ve found that lenders whose software enables them to customize programs to the unique needs of local dealerships, support a digital loan or lease origination process, and respond quickly with offers are in the best position to establish and sustain these mutually beneficial relationships. 

With this insight gained from working with regional banks, credit unions, and finance companies, let’s explore how these capabilities help lenders boost indirect lending opportunities.

Begin by Evaluating the Dealership’s Business and Risk Tolerance 

You improve your chances of establishing a mutually beneficial relationship with local dealers when you tailor the indirect lending program to their needs. And to better understand the dealership, it’s certainly worth a conversation to learn how the business is run, get a sense of their clientele, and how they currently handle indirect lending. 

During the conversation, meet as many of the personnel involved in finance to assess the degree of risk that you and they are willing to incur or avoid. If the meeting goes well, the information you obtained becomes the foundation for developing an indirect lending program that matches the dealership’s business strategy. 

Tailor Your Program to the Unique Interests of the Dealer

You’ll impress a dealership if you can tailor your indirect lending program to their specific interests. Here, software plays a critical role. Your indirect lending application or portal should provide an easy-to-use interface configured to show real rates and programs for that particular dealer. 

This allows the dealer to easily shop your rates and programs using simple queries and find deals to match highly motivated buyers. Negotiation is inherent in most auto purchases. The ability to quickly restructure existing deals online to help move the vehicle is an appealing benefit of obtaining financing from your institution.

indirect auto lending
Easy-to-navigate user interface provide dealer-specific
rates and programs based on borrower and collateral.

Make It Easy to Submit Loan or Lease Applications

Once the dealer and buyer agree on the vehicle and price, loan or lease submission should be very easy. 

Integration with your online loan or lease origination software should make it nearly effortless for the dealer to submit a completely digital application, including any required documentation such as driver’s license, income statement, or employment confirmation captured digitally. 

A completely digital loan or lease application facilitates rapid review and decision-making by the lender. More importantly, it distinguishes you as a local lender who makes it as easy as possible to apply for financing, making you the preferred lender for the dealership. 

indirect auto lending

Respond Quickly With a Loan or Lease Decision

Decision speed can truly differentiate a lender in a competitive local market. When you’ve made it nearly effortless for a dealership to structure a deal specific to the borrower and vehicle, quickly submit a loan or lease application without any delays associated with paperwork, decisioning should be equally fast. The key to speed is a combination of a completely digital application and automation driven by workflow and decision rules. 

Loan origination workflow quickly moves a loan or lease application through the review process, applying decision rules to evaluate applicant attributes, compare against credit policies, and reach a decision. In the best cases, well-qualified applicants can receive loan approval and an offer in seconds, all without the need for underwriter review.  Applicants with lower credit scores can receive conditional approval with specific stipulations. Although stipulations delay the deal/sale, lenders who support the electronic submission of required information can significantly reduce the delay.

E-contracts and e-signatures also support rapid review and approval, enabling a seamless loan or lease origination process from start to finish. A lender that offers dealerships rates and programs tailored to their markets and supports an entirely digital loan or lease origination experience can distinguish itself with the unsurpassed efficiency in providing financing.  

Analytics to Assess Dealership and Loan Performance

Custom-tailored programs and rates, easy loan and lease submissions, and rapid lending decisions are three key capabilities that help boost indirect lending opportunities at local dealerships. To obtain the greatest benefit from these relationships, use analytics to regularly evaluate the performance of these programs. With the aid of analytics, lenders can monitor the dealerships over time according to:

  • Loan and lease volumes
  • Credit tiers
  • Capture ratios
  • Follow-up loans generated  
  • Loan performance—early payoffs, delinquencies, and defaults

Dealerships that demonstrate high-volume, low-risk opportunities can be rewarded with even better programs and rates. Mid-volume dealerships can be incentivized by adjusting their programs to boost volume. And any dealerships where loan performance shows increasing risk, refocus your efforts on the dealerships that deliver results. You might have an intuitive sense of how programs are running, but factual, detailed analysis allows you to make confident decisions regarding changes to further improve program performance. 

What Keeps You From Boosting Your Indirect Auto Lending Opportunities?

If your indirect auto lending program is not delivering the results anticipated, the critical factor may be your lending software. Legacy lending solutions are no match for the automation, capabilities, and user experience available from modern, cloud-based lending solutions. These solutions excel in making it easy for dealerships to find financing, submit applications, and quickly receive an offer. In the best of cases, decisions are returned in seconds. If your software is keeping you from taking advantage of indirect auto lending opportunities that can positively impact your profitability, it may be an opportune time to consider a move to a modern lending software solution.

Getting Started

defi SOLUTIONS’ online defi CONNECT products brings together dealerships, borrowers, and lenders for a superior indirect auto lending experience. defi CONNECT integrates with defi’s flexible, scalable, end-to-end platform that includes loan and lease originations and servicing systems that provide an exceptional digital lending solution. Contact our team today or register for a demo.

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