How LMS proactively supports loan viability

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There’s no doubt that loan originations systems (LOS) have gained popularity in the automotive lending field, prompting lenders to focus their attention on leveraging these capabilities to benefit their businesses particularly since everyone in today’s market is competing for deals based on speed.

An automated LOS will help lenders underwrite applications and close deals faster than their competitors. This sometimes pushes the loan management system (LMS) into the shadows, since it may not be the “shiny object” lenders immediately gravitate to. Yet, the LMS can play a crucial role in the lender’s success in making the entire lending operation hum.

By definition, “origination” is just the beginning of how a lender gets its revenues; the organization only profits from the loan over its lifespan. If lending institutions can’t manage their loans properly, they are at risk. And the last thing auto finance companies want to do is to repossess a vehicle. It just makes sense for the lenders — and borrowers — to ensure that the loan is being serviced promptly, correctly and cost-effectively.

Instead of taking the LMS for granted, lenders should reevaluate their platforms to ensure that processes and workflows are handled reliably and seamlessly.

LMS manages how the money comes in

Loan management should by no means be considered a less attractive lending solution. It can deliver outstanding value and a unique set of benefits that help preserve the long-term investment that lenders make in their customers. Effective loan management can increase the odds that loans will be paid off in full and even help lenders do more with fewer staff.

In reality, loan management is far more intrinsic to preserving revenue than loan origination volume. LMS is about long-term administration. More precisely, it’s about leveraging customer records and other data to make sure payments are made on time. A sophisticated LMS uses advanced intelligent data retrieval processes to help lenders predict when a customer is likely to fall behind on payments based on changing financial status or evolving life circumstances.

Predicting potential delinquency

Just as LOS utilize automation and artificial intelligence to instantly verify an applicant’s income, those technologies can be applied to detect warning signs that a customer is facing instability, in real time. A job loss, divorce or delinquent payment of other bills are signals that a customer may be heading for financial difficulties. An effective LMS will flag the loan manager so that they can reach out to the borrower and devise ways to help them avoid falling behind. In these cases, the loan manager can leverage a flexible LMS to extend the terms of the loan and lower the monthly payment.

Automation saves on staffing in a labor shortage

State-of-the art LMS allows financial companies to increase productivity, consolidate administration and reduce the amount of people required to service each loan. Accounting, customer service and collections are all cost centers for lenders that are far better executed by an automated platform. An advanced LMS reduces the opportunity for human error, streamlines input and incorporates productivity-boosting features like document management and storage.

Many lenders have overlooked the benefits of a modern, sophisticated LMS solution and are still using antiquated systems from as far back as the 1990s to manage their portfolios — with a sizable number still using cumbersome manual processes. This is not unlike using an obsolete version of Windows. Think of the productivity loss that would cause. Lenders need to consider how improved their workflows would be if they managed their loans on a cloud based LMS platform that could be customized and integrated with their LOS solution. The efficiencies would be remarkable.

In the end, LOS is a promise to pay, but loan management is where the money comes in. An LMS platform helps ensure the loan’s ongoing viability as an income source. It’s time for LMS technology to take its rightful place as a high-value part of the fast-paced and ever-evolving lending ecosystem.

Vlad Kovacevic is the founder and chief executive of Inovatec Systems. Inovatec provides modern and innovative LOS, LMS and Direct systems that eliminate friction in the lending process and automate much of the manual work of originating and managing loans.

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