Auto Loan Delinquency Statistics


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Auto Loan Delinquency Statistics

The news is good—auto lending delinquency rates are down to their lowest point, holding steady at roughly 1.51% between 2021 fourth-quarter results extending into 2022. Numbers this low mean that lenders can expect more loan applications, and with it, a greater need for more efficient loan origination and service processes.

Effectively managing that increase will become easier with simplified end-to-end loan origination. 

End-to-End Loan Origination: The Benefits

The benefits of efficiency are well documented. Significant time is saved through automatic data capture, allowing lenders to both smooth and simplify loan processes. Abbreviated end-to-end loan origination workflows empower lenders through increased data access, which in turn speeds up approval rates. Customer satisfaction increases, as does available time to serve future buyers. Additional benefits include:

  • Digitizing the loan process benefits the borrower.
  • Paperwork is minimized, while approval rates soar.
  • Customized loan solutions are more accessible to lenders and buyers.
  • Lenders gain more revenue through origination fees & higher interest rates.

Many lenders’ current systems and processes consist of manual steps that may be replaced with more accurate automation technology, consolidating the management of documents.

An automated loan approval process allows lenders to gain more accuracy in loan approvals. In this busy time, automation performs the resource-wasting tasks that forestall business growth. 

Lenders are easily able to restructure both their interest rates and loan origination fees, resulting in greater revenue. 

Automated processes quickly determine customer credit ratings, including the potential to fast-track approval if ratings exceed average numbers. Conversely, if minimum loan criteria is lacking, automation saves time in issuing rejections. Lenders move on to other customers, improving efficiency.

End-to-End Loan Origination in the Cloud

Two methods exist for lender digitizing: cloud technology and digitized automation. 

Cloud options allow lenders to avoid capital expenditures or (CapEx) for system updates and equipment upgrades. Operating expenses (OpEx) remain static, saving administration costs. Cloud benefits allow lenders to gain revenue without major cost investments.

Digitized automation brings its own benefits, which include: 

Automated data extraction: Considered the simplest form of digitizing, an automated data extraction process manages information entry. Optical character recognition (OCR) identifies relevant data from traditional paper formats, completing loan form fields automatically. Manual reconciliation remains, permitting lenders to oversee the results when necessary. Through this method, machine learning (ML) begins, enabling the system to recognize common submission sources such as driver’s licenses, pay stubs, tax forms, and more. As a result, accuracy is improved, and valuable lender time is saved.

Automated intelligent matching: Artificial intelligence (AI) allows automated systems to recognize and assess standard loan information (such as income and credit scores), offering preliminary approval or denial. Lenders are alerted when an assessment of non-traditional customer criteria requires human interpretation.  

AI processing: Once in place, AI grows in task sophistication. Fraud and risk assessment are quickly detected. At this stage, analytics come into play, providing data such as loan volume and funding availability. Further, lenders gain access to customer criteria to offer other services such as extended warranties. 

AI data analytics also offers detailed predictions based on the following factors:

  • AI consolidates loan risk to uncover predictive correlations between occupation, credit history, credit score, and loan-to-value (LTV) in determining customer approval.
  • Improves loan structures: Assess factors that influence loan repayment performance, as well as identify and optimize loans that have the greatest impact on profit.
  • Recognize early warning signs: Reduce risk factors by tracking payment histories of subprime borrowers to identify potential delinquencies.
  • Business growth opportunities are identified through statistical models and aggregated data sets to identify areas of expansion.

Choosing the best system for your business needs depends on staff comfort with technology and business goals. For those who prefer to gradually upgrade a manual system, AI offers excellent value in time savings, predictive analysis, and loan optimization.

A Closer Look at the Cloud

Cloud computing offers the same benefits as AI, without capital expenditures or equipment upgrades. It allows quick implementation, system security for remote staff, and the ability to resolve any temporary bugs in the system. Software updates are automatic. Should a lender require enhanced features to make further improvements, functional upgrades are immediately available and easy to access.  

Finally, service level agreements (SLAs) for cloud options include invaluable protections against information access loss. Data support offers inclusive protection such as backup generators, redundant hardware, failover clusters, and dedicated communication links. You can expect SLAs that offer 99.99% operational reliability. Your business is protected from disasters such as unpredictable storms causing power outages, system overloads, or hardware failures.   

If the time is right to digitize your lending system, both AI and Cloud computing offer significant value. Time is saved, data is protected, and processes are streamlined to fast-track successful approvals. The resulting benefits will vastly improve your profits and help you stay competitive in the fast-moving world of loan optimization. Choosing the right provider to support your efforts will enhance your business and your customer’s satisfaction.  

Getting Started

defi SOLUTIONS provides an end-to-end solution for every stage of your lending lifecycle that includes end-to-end loan origination, end-to-end lease origination, and servicing through lease or loan disposition. defi systems save time, improve accuracy, and provide greater satisfaction for dealers and customers. With sales levels at an all-time high, keeping up with credit applications is a challenge. If you’re considering updating your manual systems, or simply interested in learning more about how defi can assist you, please contact us, or schedule a no-obligation demo.

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