loan servicing software community bank small business


The defi Team Banking, defi INSIGHT, Servicing Systems

loan servicing software community bank small businessPause for a moment and take a close look at your loan servicing process. Is it as efficient as it could be? Is it consistent?

For some community banks, loan servicing is the source of many major headaches. For example, a community bank might not be able to offer all of the loans its clients want because it simply doesn’t have the infrastructure to service those loans effectively. In this case, as in many others, loan servicing challenges can limit a community bank’s growth. 

However, there is a solution. Loan servicing software for small businesses like community banks helps you do more with less. With the right software, community banks can outsource and automate many of their manual loan servicing tasks, leading to significant time and cost savings. In this guide, we explore key features community banks should look for when they make the switch to loan servicing software

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Overcoming the Challenges of Loan Servicing 

Banks are under constant pressure to improve the loan servicing process. For smaller financial institutions, this can be a problem. Community banks typically have fewer staff and resources than larger bank organizations, which often leaves them without the resources to expand their loan servicing capacity. With only so many staff available at any given moment, it can be difficult to perform even the simplest loan servicing tasks, like payment processing, vehicle title changes, and repayment scheduling. Complex tasks like delinquency recovery or risk management can be even more difficult. 

There are three primary challenges that community banks have to overcome if they want to improve their loan servicing process: 

  • Time and workflow constraints. When loan servicing is done manually, it takes a massive amount of time. Some banks still use systems that offer little more than spreadsheets to keep track of current loans, systems prone to human error like data entry mistakes and inconsistencies. Staff also often have to interrupt their normal workflows to perform loan servicing tasks. As a result, they have less time to talk directly with customers or perform other important duties. 
  • Bottlenecks and miscommunications. Without adequate loan servicing software, community banks and small businesses have to rely on staff to process payments quickly and communicate with customers about their accounts. If the bank receives a high volume of loan applications, staff are easily overwhelmed and bottlenecks form. This can not only impact lending capacity, but may also impact the community bank’s reputation. Customers expect fast service, including immediate and accurate payment processing and capable, friendly customer service. Improved loan servicing software helps community banks provide this to their customers. 
  • Compliance issues. There are extensive regulations around loan servicing that community banks must follow to the letter. To avoid hefty fines, your loan servicing system has to stay up to date and compliant. This means continuously making improvements to the system—something that can be difficult to do without the latest loan servicing software. 

Loan servicing software helps community banks address these challenges. However, not all software is created equal. Community banks have to consider which features they need the most. 

Loan Servicing Software for Community Banks and Other Small Businesses: A Checklist 

The best loan servicing software for community banks and other small businesses is one that effectively leverages the power of automation and configurability. In other words, the software you choose should be customizable for your staff’s workflow and able to handle many of the tedious, rote tasks that your staff shouldn’t have to think about. 

To help you find the best loan servicing software for your community bank, consult the following checklist. 


How You Can Benefit 

🗹 Automated payment processing 
  • Reduces mistakes or miscalculations 
  • Keeps a detailed record of repayments 
  • Ensures the loan repayment schedule is on track
  • Frees up your staff’s time so you can put their skills and knowledge to better use 
🗹 Online portals 
  • Allows customers to easily view their accounts, make payments, and contact customer service in moments 
  • Improves customer retention and satisfaction, increasing the chances that they’ll apply for another loan in the future 
🗹 Compliance updates and patches 
  • Software is updated whenever a new regulation is passed 
  • Security patches keep customers’ data safe 
🗹 Account closeout functions
  • Process the final repayment 
  • Change over vehicle titles 
  • Analyze performance throughout the loan’s lifecycle to improve performance and reduce risk in the future 
  • Reach out to customers for cross-sales or more lending opportunities 
🗹 Customer care
  • Welcome calling for all new customers to improve client satisfaction 
  • Complaint management to address concerns right away 
  • Technical troubleshooting to help customers navigate the system 
🗹 Workflow routing and decisioning rules 

These are just a few essential features you should look for when selecting a loan servicing software for your community bank or small business. Ideally, the software you choose should have all of these features and more, as this will enable you to service loans faster and at a lower cost. 

Choosing the Best Loan Servicing Software 

With so many loan servicing software options out there, it can be difficult to decide which one is right for your community bank. While some provide just one or two of the features in the checklist above, the best software is one that does it all. This type of software, also known as end-to-end software, is the simplest and most efficient way to manage a loan portfolio. 

End-to-end loan servicing software helps community banks and small businesses refine and automate many of their current processes. This means that, even with a small staff and lean business operations, you can manage as many loans as the software can handle. This opens your bank up to many more lending opportunities. It’s much easier to expand your portfolio without worrying about the burden it will place on your staff. 

Another benefit of working with an end-to-end software vendor is that you can incorporate other types of software into your system as well. The best loan servicing software vendors offer additional software and services  like: 

Working with the same vendor for all of these services makes it easier to integrate them into your current system without producing unexpected information silos or experiencing other growing pains. 

Choosing loan servicing software for your community bank or small business is a major decision. That’s why you should partner with a software vendor that understands the community banking industry and is committed to helping small businesses succeed. With the right software, you can significantly improve your loan servicing process, customer satisfaction, and, ultimately, your bottom line.

defi SOLUTIONS is a loan servicing software vendor providing innovative solutions to community banks and other small businesses. As an end-to-end software vendor, we specialize in automation and configurability so community banks can offer higher quality services to their customers. To learn more about our software, contact our team today or register for a demo. 

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