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8 Key Factors to be Considered Before Choosing a Loan Management System
October 5, 2021With social distancing becoming the new normal, traditional lending, with in-branch origination and manual paper-based processes, has taken a huge blow. As, a result, offering Loans digitally has become a matter of survival for lenders in today’s world. In fact, according to a survey by TurnKey Lender, 57.1% of lenders were actively working to start/continue the digital transformation of their business even before the COVID crisis. They saw digitization as the most effective way to meet the customers’ demands while maintaining a fast credit system.
For the Customer, filling out manual paperwork, meeting with the loan origination officer to answer the exact same questions, and then waiting for days to get the loan approval has become unacceptable. Moreover, the interest rates and terms dictated by traditional borrower evaluation approaches are not able to offer the needed accuracy anymore, owing to the wrong metrics in the pre-digital world.
For lenders who adapt to these changes or are willing to be ready for a digital-first future of banking, a Digital Lending Platform is often the best solution. While origination is the customer or the banker end of the journey, a Loan Management System (LMS) is the core of this digital lending. Many banks have suffered greatly as they digitized their front-ends rapidly, only to take the same TATs due to old and legacy Core LMSs. True impact on the TAT is only possible through an innovative, turn-key, end-to-end lending solution that automates the lending procedure from cradle to grave. Thus, an efficient Digital Loan Management System is at the heart of the connection between the lenders seeking supreme-quality loans with borrowers demanding convenient access to credit. It is in the LMS that the loan as well as the customer relationship resides for the entire duration of the loan and hence it needs to be allotted the due criticality in the ÔÇ£Lenders Tech LandscapeÔÇØ.
Given the need for LMS in today’s world, lenders in the credit industry should look for a smart and efficient automation platform. Here, are the 8 key requirements that lenders should have in mind while choosing a lending platform.
1. Scalability
For any business to grow and scale, they need tools that allow them to do so. This calls for a loan management system that lets businesses in the credit industry grow in terms of operations and exceptional service delivery. In addition, a perfect loan management software lets lenders diversify their product offerings and improve their profit margins while catering to the emerging needs of new markets through the constant introduction of the latest and innovative products. Therefore, it is advisable to always look for a product that is scalable. The chosen LMS should be able to cater to the present needs and at the same time, it should also be able to match the future requirements as the growth curve catches the pace. A great example for this was during COVID moratorium was declared on loans and systems who could configure this requirement gave respective Banks the edge in providing a fair deal to their customers and thereby better customer retention.
2. Deployment
As the lending industry is growing constantly, it is welcoming new start-ups and every day. And, one thing about these new-age start-ups and peer-to-peer lenders in this space is that they do not have access to dedicated IT support. However, with an advanced LMS, there arise some technical issues. In such a scenario an IT-team is a must to implement, maintain, and troubleshoot the issues through an advanced tech solution that is data critical. This calls for a cloud-based loan management software service provider who not only provides quick implementation but also offers regular maintenance services such as bug-fixing, frequent up-gradation, with other IT support services when needed. Also, to note that LMS can become quite a resource hungry application given the length and the breadth of it, it will also be impacted by seasonality and economic volatility. Finally, the RBI also mandates that all Financial Information is retained for a period of 10years from the transaction, this too calls for a highly scalable infra for hosting such platforms.
3. Centralized Access
It goes without mentioning that a loan management software should offer centralized access to all customer-related data that have been stored throughout the customer lifecycle. This removes the bottleneck of storage and retrieval of borrower data through multiple systems. The Customer GOLD COPY as well as the Products Master Lists (for all Asset Products) should lie in the LMS for a much smarter use of good tech architecture. This also allows the lending organization to acquire a 360-degree picture of the customer’s profile, lending stage, credit scoring, and other connected information at a glance, from any part of the globe.
4. Speed & Agility
The most suitable discourse for the clients is the rapid and efficient sanctioning of the loan when they are able to understand the potential of the non-banking channel in a genuine sense. In a certain way, it eliminates the time-consuming work of sorting papers or documents, as well as the associated costs. Quick approval and sanction of loans is an added benefit for obtaining financial loans in the event of an emergency, saving clients valuable time and energy in the process. Such agility in an organization is a strong point to the business growth and an attraction to the clients.
5. Coverage
It’s critical to look at a loan management solution that may be used for a variety of purposes. An LMS must be able to assist with all aspects of mortgage documentation and asset finance. It should also do well in financial advancing operations such as business leasing and consumer loans. A well-structured loan management solution can do a great job in these broad areas at a reasonable cost. This adaptability across various use cases is what lets LMS software emerge as a meaningful business value driver for the company.
6. User Friendly
Not to mention, a loan system with complex UI will hardly be appreciated by any client. However, to boost the account management function and improve operational efficiency an LMS should offer a user-friendly environment. It should be easy to set up and configure in accordance with the businessÔÇÖs exclusive needs.┬á From a workflow point standpoint, the LMS should deliver excellent results. The financial institutions should get the propensity to spend less time on administrative tasks. Such user-friendliness in layout, navigation and processing will add substantial gains to the firmsÔÇÖ ROI from a loan management solution.
7. Configurable
The LMS should be driven using Configurable Rules Engine as well as Configurable Workflow Engine. These can provide immense scalability to the LMS and thereby permit all types of external changes to be accommodated including changes through the regulatory guidelines, etc.
8. Microservices-Based Architecture
Microservices is now a buzzword in the industry. LMS providers have offered software setups to the market that typically are solo-function modules with well-defined interfaces and operations. These are referred to as a Microservice architecture. A microservices-based loan management solution is credible, agile and best suited for the sanctioning of loans.
9. Security
In today’s world, when cybercrimes are reaching their peak, data security has become the talk of the town. Therefore, while choosing an LMS the lender should ensure that the privacy of the clients is not infringed upon as data fraud will lead to the loss of credibility and reputation.
With a cloud-based loan management system, various features in the form of real-time sharing, automatic creation of documents, updating and storage can be achieved. Lenders can streamline the entire loan cycle and all associated documents through can credential-based, secure cloud-based data management.
The loan management platform should be an invaluable asset to the lender and therefore has to be selected with utmost caution. Considering the above factors could help lenders make a wise and informed decision.
Biz2X Lending Software is one such solution that fulfills all the above-mentioned requirements. It offers customizable and modular programs with unique features to meet specific business demands.
Visit us at www.biz2x.com for more details.