Exploring The Latest Trends In Loan Origination Outsourcing Services

Loan origination is how individuals request and obtain an amortized personal loan. In the past, individuals had to undergo an arduous and lengthy process to get their loans approved. Lenders would put each individual through a thorough verification process to assess a borrower's financial strength. Based on a borrower’s financial strength, lenders can determine whether a borrower is likely to repay the loan.

A faster loan origination process benefits both borrowers and lenders since borrowers receive their funds quickly, and lenders can provide service to more customers. Lenders can turn to loan origination outsourcing companies to facilitate a faster loan origination process.

As mentioned, lengthy past loan origination processes have made way for shorter ones. Technology and automation have made them error-free. Yet, players in the lending and loan origination outsourcing market constantly look for ways to improve further. Before discussing some of the latest trends to expect in 2023, here are the steps in the loan origination process.

Loan Origination Process

Application/Prequalification: A borrower has to submit all the necessary documents to begin the loan origination process. Lenders use these documents to verify proof of income, bank statements, tax returns, and existing loans. These documents must be submitted either online or manually. 

Loan Application Processing: Lenders conduct a check to evaluate an application's document completeness, validity, and accuracy.

The Underwriting Process: Loan applications are approved and rejected based on the underwriting process. When deciding, lenders consider an applicant's credit score, risk score, and income-to-debt ratio. They verify the documents and information an applicant provides during this stage.

If applicants have been successful until then, the final step is calculating the loan amount, interest rate, and EMI. Their score in the underwriting process determines the terms and conditions applicable.

Latest Trends in 2023 

Lenders and loan origination outsourcing companies can use the following strategies in 2023 to create a smoother and more efficient loan origination process. 

· A high percentage of customers do not complete the first step of the application process. Lenders and loan origination outsourcing companies can utilize a CRM (customer relationship management) system to understand where they fail to complete the application process. Lenders can use this information to streamline the application process, including data collection, verification, and credit decision process. CRM stores each customer's data, as well as the various interactions they make to serve customers better.

· Automation can greatly speed up an applicant's evaluation and loan decision process. Automation greatly reduces manual labor, from data entry to data processing. Automation also evaluates an applicant's eligibility for a loan, making the entire process integrated and error-free.

· Another important trend in 2023 will be making the loan application process easy and seamless on mobile applications and tablets. Implementing mobile apps with a loan origination system is an ideal way of increasing the number of applications, managing data collection, and ensuring better communication between borrowers and lenders.  

· A major change to expect over the next two years regarding AI-based (Artificial Intelligence) loan origination software. AI assists in pre-qualification and can detect possible fraudulent transactions before closing a deal. AI software can provide chatbot interactions, help personalize customer interactions, and accelerate the loan origination process.

· Dynamic queue management is a new technique that lenders use to focus on improving the collection process from borrowers. Lenders set up queues based on different conditions for various borrowers to greatly reduce the number of defaults on installments. It streamlines the cash collection process, eases the strain on borrowers, and creates a less troublesome experience for all parties involved.

CONCLUSION

A more efficient and accurate loan origination process benefits lenders and borrowers. While there have been major improvements in the loan origination process in recent years, one can expect the trends discussed in this article to continue growing and improving the loan origination process through the efforts of lenders and loan origination outsourcing companies.