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ASSET FINANCE PROCESS IMPROVEMENT FOR BANKS & CREDIT UNIONS

The defi Team Banking, Credit Unions, defi INSIGHT, Electric vehicle lending, Managed Servicing, Servicing Systems, Simplifying Processes

Representation of the consumer asset finance process

The consumer asset finance process refers to lenders that offer financing to individuals for purchasing various kinds of assets, including vehicles, electronics, appliances, furniture, and other consumer goods. Banks, credit unions, specialized financing companies, and retail stores with finance options can all function as consumer lenders. Asset financing allows consumers to acquire assets without making large upfront payments and pay them off with scheduled payments and timeframes.

Asset Finance Process Overview

Cars, boats, jet skis, snowmobiles, and other personal vehicles are often financed with consumer asset finance. The loan terms can range from 12 to 60 months with regular monthly payments, although some may also include balloon payments. 

This blog explores potential improvements banks and credit unions can make to consumer asset finance processes using tools like finance technology (fintech). Before we get into more detail, let’s look at an overview of the asset finance process for lenders and consumers:

1. Application Submission 

Consumers who want to finance an asset submit an application with the consumer lender. An application usually includes personal info, details about the asset, its cost, and preferred terms.

2. Credit Evaluation

The lender assesses the applicant’s creditworthiness by looking at the consumer’s credit history, income, employment status, and other financial information. Based on the consumer’s ability to repay the loan, the lender determines their associated risk.

3. Loan Approval

Contingent upon the credit evaluation, the consumer lender then approves or denies the application. Once approved, the lender determines the loan amount, interest rate, repayment period, and down payment.

4. Documentation and Agreement

The lender prepares legal documents outlining the loan terms, including the interest rate, repayment schedules, and other loan terms. The lender and consumer then sign a formal financing agreement.

5. Funds Disbursement

The lender disburses the funds to the retailer or dealer, where the consumer will buy the asset. The consumer can then buy the asset from the retailer or dealer.

6. Asset Ownership and Repayment

The consumer takes ownership of the asset and makes regular payments to the lender. Interest and principal are both covered by the payments.

7. Customer Support and Communication

The lender provides ongoing customer support to address questions or concerns and maintains transparent communication throughout repayment.

8. Payment Completion and Ownership Transfer

The loan is considered fully repaid once the consumer makes all the required payments, including principal and interest. Ownership of the asset is then transferred entirely to the consumer. The lender closes the financing account and the consumer’s obligation to the
lender is fulfilled.

Asset Finance Process Improvement

Asset finance process improvement refers to changes lenders make in their processes and workflows to increase efficiency. Lenders often use technology to automate, improve accuracy, and ensure consistency when implementing process improvements in the finance industry. Banks and credit unions can improve their asset finance process by considering the strategies listed in the table below.

How Banks and Credit Unions Can Improve the Asset Finance Process
  • Implement digital tools for application submission, document signing, and loan servicing to simplify the process for consumers.
  • Tailor financing offers based on consumer credit profiles and preferences.
  • Provide resources to help consumers understand the terms, costs, and responsibilities associated with financing.
  • Maintain transparent communication with consumers throughout the asset finance process.
  • Leverage analytics tools to identify patterns, predict default risks, and make informed decisions to optimize loan servicing strategies.
  • Focus on providing seamless and user-friendly experiences throughout the financing journey.

By implementing these strategies, consumer lenders can gain a competitive edge and offer a smoother, more customer-centric asset finance process.

How Can Asset Finance Technology Help?

Consumer lenders can benefit from asset finance technology by making their products more flexible and easily adaptable to borrowers’ needs. Below, we list several ways asset finance technology can help:

  • Personalized Offers: Technology analyzes borrower data to create personalized financing offers based on credit history, income, and preferences. Borrowers frequently report a better loan experience with personalized loans. 
  • Fast Approval and Decisioning: Automated decisioning powered by technology allows lenders to approve loans swiftly, saving borrowers time and facilitating time-sensitive purchases.
  • Online Negotiation and Customization: Digital platforms enable borrowers to negotiate terms and customize financing packages online, making the process more interactive and transparent.
  • Real-time Loan Modifications: Using asset finance technology, borrowers can extend loan terms and adjust payment frequencies in real-time to address changes in their finances.
  • Digital Self-Service: Borrowers can manage their accounts, view statements, and make payments online with asset finance technology.
  • Automated Payment Solutions: Lenders can offer automated payment solutions that deduct payments directly from borrowers’ accounts, reducing the risk of missed payments.
  • Integration with Financial Planning Tools: Integrating asset finance technology with other personal finance tools can help borrowers understand the big-picture impact of different loan terms on their finances.
  • Early Payoff and Refinancing Options: Asset finance technology can calculate early payoff amounts and give borrowers refinancing options, helping them save on interest.
  • Real-time Assistance: When borrowers need help figuring out financing options or clarifying terms, chatbots, and online customer service can provide immediate answers.

Lenders can offer more flexible financing products by leveraging asset finance technology. Such technological advancements make borrowing more accessible and give lenders a competitive edge. With so many available options to improve the asset finance process, you’ll want an expert partner like defi SOLUTIONS to suggest flexible financing products that can set your lending business apart from the rest.

Selecting the Right Asset Finance Process Option

Cloud-based software-as-a-service (SaaS) applications let you scale up and down quickly in response to economic conditions. In addition, many of these technologies can help mitigate consumer lending risks like fraud, human error, and security threats. SaaS solutions allow you to pay only for the fintech services you use, which is an attractive option in an uncertain economy. 

With the power of cloud-based platforms offered by defi SOLUTIONS, lenders can improve their asset finance process and drive business growth. With our easy-to-use configuration tools, rules-based workflow routing, and scripting tools, your customers can choose how and when to contact you.

We’ve got you covered if you’re considering outsourcing your asset finance process. defi MANAGED SERVICING provides a comprehensive asset finance solution by leveraging Artificial Intelligence (AI) and automation technology. Whether you prefer to manage things hands-on or entrust the process to our experienced team, we are here to meet your needs.

Getting Started

defi MANAGED SERVICING offers you decades of lending industry experience and the defi SERVICING state-of-the-art SaaS servicing system. With defi MANAGED SERVICING, our team of experts is ready to help you with complete back-office support for both auto loans and leases, including our white-label customer service. Using the latest cutting-edge technology, you can reduce budget expenses while improving auto loan and lease servicing, lease disposal, and leased vehicle disposition. To learn more about asset finance process technology, contact our team today or register for a demo to learn how our cloud-based managed servicing products can transform your lending business.

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