Recent economic data indicates that we’re experiencing one of the fastest-growing economies since 1984. As a result, lenders are likely to experience an increase in the number of lease and loan applications. To take full advantage of the emerging opportunity, lenders will need software that provides the user experience that today’s borrowers expect and applies automation and innovative lending technologies to streamline the lease or loan origination process. In this blog, we focus on lease or loan origination basics and explain how the right software makes the process easier for borrowers as well as lenders.
Capture Borrower Information Easily and Accurately
How easy is it for a prospective borrower to apply for a loan or lease? If lease or loan origination is a protracted process because of limitations on where and when it can be done, or requires printing, filling in, and mailing paper forms or copies of documents, then it’s time to move to a completely digitized process. A modern loan origination system enables easy and accurate lease and loan applications by:
- Allowing online submissions via desktop or mobile devices—tablet or smartphone.
- Guiding the borrower using display logic, masking, validation, and rules to intuitively and accurately enter the required information.
- Digitally capturing documents—driver’s license, pay stubs, proof of residence—and submission as part of the loan application.
- Submitting, within minutes, a complete loan application.
A completely digital lease or loan origination process makes it easier for applicants to submit an application online. Via a mobile device, an application can be submitted at any time, from anywhere. Lenders who also extend these completely digital capabilities to dealerships can differentiate themselves from lenders still bogged down with paper-based origination processes.
A completely digital lease or loan application lays the groundwork for greater efficiency in lending decisioning by allowing lenders to begin the evaluation process immediately. There’s no need to wait for paperwork to arrive and no need to rekey data from paper. As we’ll see in the next section, in the best of cases, a lending decision can be made in seconds and an offer can be sent by email or text to the applicant.
Employ Automation to Evaluating Creditworthiness
With a completely digital lease or loan application, a modern loan origination system allows lenders to automate many steps and decisions that previously required an underwriter’s time and attention. The automation features that bring a significantly greater degree of efficiency to the decisioning process are rules, workflow, and integration with innovative lending information services.
Rules allow comparisons of applicant information against predetermined criteria and based on the outcome of the comparison, can determine the next step in the loan origination process. Using rules, the following comparisons can be executed in a fraction of a second without the need for underwriter involvement.
- If credit score is ≥ 800, then skip underwriter review step
- If credit score is < 670, then increment down payment by $2,000 and increment rate by 0.5%
- If reported income < $3,500 and loan request is > $25,000 then request income statement
Rules can be simple, as in the examples above, or combined to evaluate complex lending decisions quickly and consistently. The most sophisticated use of rules can drive auto structuring to boost an applicant’s chances of obtaining credit if they have initially failed one or more credit policies. Auto structuring iteratively modifies terms with the goal of matching a credit policy.
Workflows can control the loan origination from start to finish and use rules to determine the specific steps. Individual workflows can be established based on the type of lease or loan—auto, recreation, boat, etc. Workflows determine the proper sequence of tasks to be accomplished—bureau call, check for duplicate application, check for fraudulent information, create a scorecard, underwriter reviews, apply auto-decline rules, apply auto-approval rules, include stipulations, and create an offer. Within each of these steps, additional workflows may be included.
Combining workflows and rules helps ensure that lease and loan applications are processed consistently and quickly to allow a lender to respond promptly to every lending opportunity.
Integration allows a lender to take advantage of a growing number of innovative lending information services that help accelerate lending decisions and reduce lending risk.
- Employment and income verifications confirm or refute the information provided
- Identity fraud analysis uncovers indications, subtle or obvious, of misrepresented information
- Vehicle valuation compares the declared vehicle value against an extensive database to arrive at an accurate valuation
These and dozens of other integrated information sources can be configured by knowledgeable lending professionals. There’s no need for protracted, customized programming to take advantage of these capabilities and improve confidence in your lending decisions.
Making It Easy to Say Yes
When you’ve made it easier to apply for a lease or loan and you’ve quickly and confidently confirmed an applicant’s creditworthiness, you can also make it easy for the applicant to accept your offer. Packaging the loan offer as an e-contract and sending it via email or sending a text with a secure link to the e-contract is a sure way to further impress a prospective borrower with the speed of your response. The terms and conditions stated in an e-contract can quickly be reviewed online, on a mobile device, anytime, anywhere. There isn’t a more convenient way to extend an offer. And by including e-signature capabilities in the e-contract, you make it easy for the applicant to accept the terms and conditions and allow lenders to take the next step in funding.
Lease or Loan Origination Basics: Focus on Efficiency
A modern loan origination solution enhances the efficiency of nearly every basic step of a lease or loan origination process—submission, decisioning, and extending an offer to qualified borrowers. Advances in lending automation and cloud-based information sources enable lenders to be far more efficient, productive, and responsive to their lending opportunities.
defi SOLUTIONS provides innovative, configurable solutions to enhance the efficiency of lease or loan originations, from the basics to the most advanced. We cover the complete lending cycle with loan management and servicing, analytics and reporting, and a wide range of technology-enabled BPO services. If you’re struggling with inefficiencies in your current loan origination software, take the first step in realizing the benefits of modern technology. Contact our team today or register for a demo.