Over the past few years, numerous FinTech lending companies have emerged, calling themselves tech companies. SoFi, Lending Club, PeerStreet, Karna, and others have tried to ease the process. Yet even with the introduction of these digitized options, many lenders cease to adopt the new digitized features and instead continue to rely on the old-fashioned manual way. This way of doing business is not intrinsically wrong but it is not cost-effective and is prone to error. Also, clients seek a better experience that includes instant satisfaction and an engaged experience from the moment they apply for a loan all the way to paying for it.
Continuing to operate with spreadsheets or antiquated systems is a sure way to lose business and potentially acquire more risk than necessary. Also, in this economic climate making things more efficient is not a luxury but a must. When one considers the cost of one loan origination and/or servicing professional is close to six figures and that still does not account for oversight. On top of that, your throughput does not increase by adding more people but by automating tasks. Let’s take a look at what these tasks are and how to automate them.
What will solve this aggravating issue for lenders? A loan management system. Before diving into the benefits of using a loan management system, let’s first take a look at what it is.
Loan management systems are applications that automate the processing and servicing of loans. In 2021, the global loan servicing software market size was valued at $2.3 billion, but by 2031, it is expected to reach $9.5 billion. It’s no wonder that, with digital transformation assuming a faster pace, loan management systems are rapidly being adopted.
Advantages of Having a Quality Loan Management System
Now that we have an idea of what a loan management system is, let’s break down three key benefits to using a quality loan management system.
Reduce the Effort
From closing, servicing to payoff, managing the loan servicing process takes a lot of effort. There’s boarding the loan, tracking the payments, having to send an alert for a payment reminder or a missed payment, and more. When you implement a robust loan management system, everything can be done automatically. So choosing the ideal modern system, where you can automate everything from payments to collection, makes the process seamless and quick.
Eliminate Human Error
When you use an efficient loan management system, everything, from payment to collection activities, is fully automated. Relying on this automation eliminates the possibility of transactions being recorded inaccurately and those careless human errors occurring. Customers will no longer have to worry about those pesky billing errors, and you won’t have to stress over losing business because of customers’ unhappiness. Relax and let the system take care of it.
Improve the Customers’ Experience
Utilizing a loan management system eases the process of onboarding new clients, managing payments, and keeping the communication line open. With an online portal that can be accessed at any time and payments being taken care of automatically, the whole customer experience is vastly improved and all parties are happy.
Since we have a clear idea of the benefits to using a modern loan management system, let’s take a look at five best practices to help expedite and manage loan applications and automate the financing and collection process.
Tips to Modernize Your Loan Management
- Streamline Loan Boarding
The process begins with loan boarding, and the tiresome procedure of manually entering and re-entering data can be exhausting. This is why it is important to streamline the loan boarding process and make sure all the data is seamlessly transferred from loan origination into loan servicing. Intuitive loan boarding easily populates loan terms and other important information for faster loan bookings, making this a better user experience and enhancing data consistency.
- Integrate Payments
Customers get tired of having to pay by wire or by check, so make this chore so much easier by giving them the option of having payments being taken out automatically. And, these payment gateways or ACH systems can be integrated directly into your loan management system.
- Simplify Decision and Approvals
When it comes to loan modifications or a request for a draw to be approved, customers become frustrated by having to wait long periods of time for a decision to come back. With a loan management system, the whole decision and approval process is quick and simple for all parties.
- General Ledger (GL) Automation
Accounting teams should no longer have to struggle to keep their accounting system up-to-date. With the use of a proper general ledger (GL) mapping that automatically generates transactions based on a predefined field mapping, the allocation of funds to the correct GL accounts can easily be done automatically. This mapping will help transfer GL data from the loan servicing system into your GL accounting software.
- Permit Self-Service
Customers love the option of self-servicing their loan. A loan management system provides them and investors with a portal where they can access their information, download statements, submit payments, request payoffs, and whatever other business may need to be taken care of.
Taking the First Step
Statistics are showing that, by 2024, institutions that provide a total digital experience will outpace their competitors by 25% in metrics for employee and customer satisfaction. With these benefits and tips to modernizing your loan management, why wait to take the first step? Sit down and strategically map out your process, then take note of any gaps, and finally, implement a system that includes the five tips presented in this article. Doing this will make the loan management process simple and painless for your employees and customers.