How a Digital Lending Process Can Benefit Finance Companies
If lenders haven’t updated their legacy lending system in a while, they’re in the right place. A digital lending process takes advantage of technical innovations, including cloud, decision rules, imaging, mobile, and analytics. The result is a significantly greater degree of automation. Automation means lower processing costs, better-quality lending decisions, reduced risk, and improved compliance. Digital improves every step of the lending process from applications through servicing.
Capture Applicant Information Digitally
Borrowers expect to initiate a loan application from anywhere — home, dealership, credit union, or bank. With cloud-based systems, lenders make services available to applicants in these places and potentially improve look-to-book ratio.
Easily-customized user interfaces, workflow, and decision rules guide applicants in entering data. A digital process helps correct data entry errors and optimizes workflow based upon application type — new, used, boat, or recreation vehicle. Identification and paper documents can be scanned or captured digitally, eliminating cost and delay associated with mailing.
A digital process ensures accuracy and completeness of the application, captures applicant information digitally, and facilitates faster underwriting and funding.
Digital Optimizes Underwriting
Every lender strives for underwriting efficiency and decision quality. When an applicant’s information, including “paperwork,” is in digital format, manual steps can be eliminated thanks to workflow and decision rules.
Decision rules applied to an applicant’s credit score determine the workflow. FICO scores of 800+ may follow an auto-approval workflow. FICO scores lower than 580 may be auto-declined if that’s below the line. FICO scores of fair to very good are assigned to workflows where a combination of applicant attributes and underwriter expertise determines creditworthiness.
A digital lending process enabled by cloud provides easy integration with credit bureaus, alternative credit data, valuation, and risk services. During the workflow, relevant services are automatically accessed to verify applicant information, determine valuation, or acquire additional data to determine creditworthiness.
Decision rules also support compliance requirements—Equal Credit Opportunity, Truth in Lending, and Servicemembers Civil Relief. Rules ensure required steps are consistently executed, verifications are completed, and lending decisions are made according to federal and state guidelines.
Digital Servicing is Efficient and Compliant
A digital process makes it easy to move a borrower through the lending cycle, from application through servicing. Borrower information acquired digitally during the application, underwriting, and funding processes automatically move to loan servicing. With a complete digital history, servicing agents access all relevant information instantly to respond to borrower inquiries.
Analytics: The Best Reason for a Digital Lending Process
A digital process creates a wealth of application, underwriting, funding, and loan portfolio data. Analytics provide a detailed understanding of lending processes and portfolio performance. Analytics alone may be the best reason for adopting a digital lending process. With borrower information captured digitally and every lending step recorded, analytics provide insight to continually improve lending efficiency.
defi SOLUTIONS offers a cloud-based system enabling lenders to achieve a digital lending process, from loan origination through loan servicing. The company welcomes the opportunity to show lenders how cloud, automation, decision rules, and analytics help achieve greater efficiency in their lending business.
