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The defi Team Credit Unions, defi INSIGHT, Originations, Reporting & Analytics

loan software for credit unions

Credit unions are gaining market share in the US auto lending sector, according to a December 2021 article published in Credit Union Times. This is especially good news, as auto sales in November 2021 fell 1.9 million to 13 million from 14.9 million a year ago. The tight auto market is partly caused by supply chain issues due to residual pandemic-related shortages in computer chips and other auto components. According to an Experian report released in the spring of 2022, credit unions control 22.06% of the auto finance market, up from 18.55% in 2021. The reduced market share of captive lenders contributes to much of this gain, with credit unions’ traditionally offering lower interest rates.

With the tightened supply of new vehicles causing overall US auto sales to decline, credit unions need something more to stay competitive. New lending technology offers a means to keep competitive, especially when it comes to loan software. Credit unions that stay on the leading-edge of this technological revolution in lending software are well-placed to solidify these gains in auto lending market share. When it comes to choosing the best auto loan software, credit unions should adhere to a few guidelines.

Capabilities That Keep You Competitive

Choosing and implementing the right technology is key for any lender to stay competitive in the auto lending market. Additionally, the wealth of information available online has made consumers better informed about their options. With innovative loan software, credit unions can take advantage of cutting-edge capabilities. Using cloud-based software that’s easily configured and integrated, along with data analytics, credit unions can better respond to market dynamics to remain competitive and profitable.

By updating to modern loan software, credit unions can allay their concerns about continued support, product direction, future enhancements, and the costs of maintaining legacy software.

Cloud-Based Loan Software

Cloud technology is transforming the lending industry, making services available to a broader range of customers while also decreasing costs and improving the reliability of services. When compared to on-premise legacy loan software, credit unions can utilize cloud-based platforms to save time with assessing applications and make quicker responses.

With cloud-based auto loan software, credit unions can easily scale up or down their operations in line with lending cycles. During times when there’s a high volume of loan applications, the system can automatically adjust to meet demand. Conversely, when the auto financing sector tightens, credit unions can scale back their investment.

Cloud services are also more reliable, with many service-level agreements (SLAs) capable of delivering at least 99.99% monthly uptime. Providers like Amazon Web Services run data centers that accomplish this with redundant hardware, backup generators, and dedicated communication links. This infrastructure is what providers use to link lenders with innovative loan software. Credit unions utilizing the cloud will see greater reliability and operational capabilities, which in turn boosts profitability.

Configuration for Quick and Auditable Process Changes

To change legacy loan software, credit unions must invest in skilled developers who can make alterations to existing processes. Conversely, modern cloud-based loan software can be easily configured without special programming skills. This ease in process configuration just requires input from authorized business users, who can make modifications themselves. In this way, credit unions can adjust their lending processes to better serve their focus market.

With the ability to configure loan software, credit unions can:

  • Customize application forms and branding to match the lending services offered.
  • Make modifications in response to federal and state regulations.
  • Adjust credit policies to reduce risk.
  • Integrate new data services to improve speed, while enhancing quality of credit decisions.
  • Change the layout of an underwriting scorecard.

Using modern loan management software, credit unions can organize each of the main parts of the lending cycle—from applications to servicing. Utilizing individual pages, experienced employees can be guided through the configuration process. By simply selecting, dragging, dropping, and entering values, changes can be made to sections, data fields, formulas, and rules.

The ability to completely control configuration allows knowledgeable personnel not proficient in programming to make changes to loan software. Credit unions can assign individual users, giving them authority to make changes that are dependent on their role and skillset. In this way, responsibilities can be assigned based on expertise and position. This allows the most senior or capable personnel to configure areas like compliance, underwriting, funding, or servicing.

In addition to the role-based permissions and responsibilities assigned to individual users, configurations can help the system integrate with credit bureaus and alternative credit data sources. Configurations can also be applied to establish decision rules that evaluate such things as creditworthiness, automate deal structures, or determine who can authorize overrides or exceptions. Compliance initiatives can additionally be handled by cloud-based loan software. Credit unions can make configurations to automatically record the history of system audits, providing evidence of specific changes made to comply with regulations.

Pre-Integrated Data Sources and Services

Data providers like Digital Matrix Systems, LexisNexis Risk Solutions, and PointPredictive now offer credit unions a wealth of additional consumer and financial information. With the data these services provide plugged into auto loan software, credit unions can then garner a more detailed and accurate picture of an applicant’s financial position. When combined with traditional credit data, lenders are able to make better lending decisions, reducing risk and improving loan portfolio performance.

Loan software that’s pre-integrated with such data services offers the best value for money by saving the time and expense of a major or custom integration. These integrated platforms also allow lenders to configure specific data fields with differing formats and field names for each data service. Loan software vendors should be able to assist with normalizing this data, ensuring that it can be used in scorecards or term calculations.

These data sources and services give lenders a definitive advantage when pre-integrated into loan software. Credit unions can use these resources to extend credit to new market segments, identify fraud, reduce risk, and make better-quality lending decisions.

Analytics for Continuous Process Improvement

Data analytics has become one of the most powerful tools in any data-driven industry. Auto lending is no exception. With modern loan software, credit unions can easily capture and create valuable applicant, borrower, process, and portfolio data. The true value of this data is only truly realized through analytics.

Credit unions benefit from data analytics in two ways. First, by monitoring lending processes they can identify potential bottlenecks, evaluate overall and individual productivity, and identify outliers in the data. Detailed analysis of lending processes gives credit unions the ability to report over a given period:

  • Average turnaround time for auto-approvals
  • Which underwriters are most productive
  • Percentage of applications auto-declined
  • Number of and reasons for overrides
  • Ranking reasons for adverse actions to identify any potentially disparate impact

Second, by analyzing their loan portfolio, credit unions can uncover factors that positively and negatively influence performance. Auto loan portfolio analysis can reveal:

  • Correlations between age, occupation, credit history, credit score, and loan-to-value (LTV), as well as make or model of vehicle, in order to reliably predict delinquencies or defaults.
  • Factors that influence profitability, giving credit unions the opportunity to adjust or optimize in order to continually improve profitability.
  • Growth opportunities by comparing different portfolio segments against one another to determine where to find the greatest opportunities.
  • Common attributes of borrowers who are 60 days delinquent in order to predict the probability of default.

The best loan software incorporates data analytics as an integral component. By ensuring proper integration of loan software, credit unions can develop and run reports without needing to know about technical details, like the underlying data schema and formats. This is hugely advantageous to credit unions, who typically don’t have the resources to hire a dedicated data analyst.

Select the Best Loan Software for You

When it comes to replacing legacy loan software, credit unions shouldn’t delay moving to the cloud. Additionally, a modern, cloud-based software platform provides the greatest value when it’s highly configurable. Integration of a wide range of credit and consumer data sources and services will also help lenders compete. To improve efficiency, data analytics offers a way to optimize a lender’s portfolio performance. Using a cloud-based, easy-to-configure, and well-integrated supported by built-in data analytics, loan software for credit unions will help them compete and keep up with consumer demand.

Getting Started

defi SOLUTIONS offers solutions for a lender’s complete loan or lease lifecycle. Partnering with captives, banks, credit unions, and finance companies, defi’s market-leading solution helps lenders exceed borrower expectations. From digital engagement through the complete lending process, defi sets new standards for flexibility, configurability, and scalability in originations, servicing, and managed servicing. defi SOLUTIONS has the backing of Warburg Pincus, Bain Capital Ventures, and Fiserv. For more information on modern loan software for credit unions and how defi can help, please visit   

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