Loan Origination Software

Loan origination software (LOS) is a tool that automates the end-to-end loan portfolio cycle. The loan portfolio cycle involves the application and approval of loan products. Loan products are managed centrally through loan origination software. Loan origination software ensures a simple and improved loan process as well as reduced regulatory compliance risk for businesses. Businesses can benefit from loan origination software by having a general view of the borrower transactions across all channels within one platform. Within this one platform, each transaction is monitored using real-time business activity and audit trails by the loan origination software.

Loan Orginication Software

Common loan origination software features:

  • Loan portfolio management enables creating and managing loan portfolios such as mortgage loans, commercial loans, and construction loans.
  • Loan application dashboard that lets users and credit officers identify and apply for the right loan through an online interface.
  • Document tracking builds a central repository of files like loan applications and customers’ income reports.
  • Automated underwriting creates rules for loan approval and automates risk and viability analysis for faster and more precise decisions about a customer's creditworthiness.
  • Disbursement management approves loan requests and keeps track of fund delivery records through online payment getaways, bank checks, and wire transfers.
  • Customer management deals with the new leads, prospects, and existing customers using a single location.
  • Billing and invoicing generates invoices of loan delivered and payments received, which are also shared with the customers via e-mail or SMS.

Aside from these common features, many loan origination softwares offer mobile applications and 3rd party integration tools. These 3rd party tools, like accounting solutions, allow businesses to expand the functionality of their loan origination software.

How does loan origination software work?

Loan Origination software works through several stages. These several stages are very important to ensure an improved customer experience.

  • Pre-qualification or pre-screening is the first stage of loan origination. In this first stage of loan origination, the lender or creditor evaluates if the borrower is eligible for a particular loan. This particular loan has its respective requirements from the borrower. The borrower needs to accomplish the following identity proof documents in order to secure the loan.
               1. ID proof like a passport or an acceptable government-issued ID
               2. Current employment status, and any income status certificate
               3. Credit score
               4. Bank statement and previous loan statements
  • The application process is where the borrower gives the relevant information to the lender. The lender uses the information from the borrower and proceeds in processing the loan. Processing the loan involves a ton of paperwork before the switch to digital applications. Digital applications remove human error and improve turnaround time.
  • Application processing is where the lender processes the application. The application is reviewed by multiple departments. The multiple departments verify and validate the application. The application may require corrections if there is some missing information.
  • Underwriting is the process where the lender analyzes the borrower’s financial information. The financial information reveals how much funding can be granted by the lender. The lenders can have different scoring methods such as credit scores, risk scores, outstanding loans, and the like to evaluate the borrower’s eligibility. The borrower’s eligibility can also be calculated by using the Loan Origination Software.
  • Credit Decision is the result of the underwriting of the lender. The lender decides whether to approve or deny the loan application. The loan application can be decided by using Loan Origination Software. The Loan Origination Software utilizes AI-powered software to analyze the different risk factors and scores more efficiently and faster.
  • Quality check is where the lender checks if the processes are error-free to ensure compliance. Compliance with its regulatory procedures is important to the lender. The lender verifies the application one more time before the last stage.
  • Funding is the last stage of Loan Origination, where the lender makes the funds available. The funds are available once all the documents are verified and signed.

Loan Underwriting Software

Loan underwriting software is a tool that automates the process of verifying the borrower's financial information. The borrower’s information may include income, assets, or property details. These details are crucial in the final approval of the loan application. The loan application can be processed using advanced artificial intelligence (AI) technology. Advanced artificial intelligence (AI) technology uses robotic process automation (RMA) and machine learning (ML). Robotic process automation (RMA) and machine learning (ML) analyzes credit report to make instant credit decisions.

Credit decisions from loan underwriting software are more cost-effective than manual underwriting labor. Manual underwriting labor can take lenders days for application analysis. This application analysis consists of long wait times. The long wait times consist of branch visits. Branch visits are where applicants need to be physically available to go to a branch or take a phone call from a lender officer. The lender officer is provided with financial information. This financial information includes pay stubs and tax returns. The pay stubs and tax returns are analyzed and confirmed by third-party institutions like company employers and banks.

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How much is Loan Origination Software?

Loan origination software pricing can vary depending on the software provider, the number of seat needed for a plan, and the features needed within the software.  According to Capterra, loan origination software can cost upwards of $150,000 for one-time payments, $10,000 for annual payments, or up to $1,000 for monthly payments.

Mortgage Origination Software Providers

Capterra offers a comprehensive overview of available loan origination softwares and provides recommendations based on reviews and product testing. Capterra outlines the top softwares, an overview of their features, pros and cons, and expert recommendations. This is a great resource for any professional in the market for an LOS system. Check out Capterra’s guide here.

Best Commercial Loan Origination software

As many businesses have unique needs when it comes to the LOS system they use, its not a one size fits all product. Depending on your industry, lending process, and digital needs one LOS could be best suited for your business while it not be best suited for another business. It is important to research the different options and prioritize your objectives in using the software to find the right fit for your business.

Whichever commercial loan origination software you use, iSoftpull can connect their Intelligence Indicator API to help you make better risk assessments. The iSoftpull Intelligence Indicator API automates business processes in many ways, such as:

  • Instant pre-qualification notifications
  • CRM Integration
  • Document tracking builds a central repository of files like loan applications and customers’ income reports.
  • Web App Integrations
  • Phone Room Integration
  • Appointment Setting Insights
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Loan Origination software for auto loans

As stated above, it is important to take inventory of your business’ specific needs when deciding on a new LOS system. Many LOS platforms have tools that cater to the auto industry specifically, which would be recommended for any auto dealer providing financing.

Whichever loan origination software you use for auto loans, iSoftpull can help further maximize your efficiency utilizing its available APIs, which can be easily integrated into any LOS system. iSoftpull’s Intelligence Indicator API can help you make instant credit decisions. These instant credit decisions undergo a pre-qualification process using the iSoftpull Intelligence Indicator API. The iSoftpull Intelligence Indicator API uses the lender’s credit score limits to determine if the borrower is qualified for auto loan financing.