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.